A system and method for controlling a hybrid vehicle including a transmission having a torque converter with a bypass clutch include controlling the slip between the impeller and the turbine of the torque converter in slip mode operation to regulate the converter torque ratio and maintain substantially constant torque at the turbine. Controlled slip uses the hydrodynamic coupling of the torque converter to balance the desired and delivered torque while damping torque disturbances transmitted through the driveline to manage noise, vibration and harshness (NVH).