A system for heating and cooling the transmission fluid including a heat exchanger adapted to transfer heat between an engine coolant and a transmission fluid and a controller for controlling a valve to place the system into a select one of three modes including a heater core priority mode wherein no engine coolant flows to the heat exchanger, a heating mode wherein hot engine coolant flows directly to the heat exchanger from the engine and a cooling mode wherein cool engine coolant flows directly to the heat exchanger from the radiator, whereby the transmission fluid is heated in an efficient manner with minimal impact on passenger compartment heating.