A two mode power-split electric hybrid system and a method of control said hybrid system. The hybrid system is comprised of an engine, a transmission, an energy storage device and a control system for effecting said control method. Said transmission is a reconfigurable power split system, comprising a power-splitting device and an output power path selecting device. The power splitting device includes a compound planetary gear system and two electric machines which form a local series electric hybrid system. Said transmission regulates the output power state of said hybrid system by controlling power flow within said local series hybrid system. The hybrid system provides at least two operating mode, an output power split mode and a compound power split mode. Said control system includes multiple controllers and control modules. In accordance with the operating conditions of the hybrid system, said control system computes and sets system power requirement, allocates ob board power resources and sets engine operating speed and torque. In addition, said control system sets the operation mode of the transmission and controls the engine speed by adjusting operating torque of electric machines, based on the differential signal between reference engine speed and actual engine speed. Said control system is also capable of controlling engine torque through engine controller.