A hybrid vehicle with an engine, an electric drive motor and battery, an automatic transmission with a torque converter having a bypass clutch, and a powertrain controller dynamically adjust the torque converter slip to balance fuel economy and drivability during a transient torque request by using motor torque to satisfy the transient torque and applying feed forward control of the fluid pressure in the bypass clutch based on the motor torque and feedback control of the slip to maintain torque converter torque ratio substantially constant during the transient event.