A drive system for a hybrid vehicle and a method of operation of the drive system are provided. The drive system includes an internal combustion engine having a shaft, a vehicle transmission having a transmission input shaft and an output shaft, a transmission clutch between the transmission input and output shafts, an inertia-mass drive unit arranged between the internal combustion engine shaft and the transmission input shaft, a first clutch between the internal combustion engine shaft and inertia-mass drive unit and a second clutch between the inertia-mass drive unit and the transmission input shaft; and an electrical machine torque-transmittingly connected to the transmission input shaft. The inertia-mass drive unit may include rotational oscillation reduction device. Operation of the first, second and transmission clutches in coordination with electric motor and engine operation provides multiple operating modes while minimizing operator disturbance during transitions between engine deactivated and activated states.