A hybrid vehicle and method of control are disclosed wherein the ratio of engine speed to vehicle speed varies continuously in some operating modes and is controlled to simulate a discrete ratio transmission in other operating modes. The disclosure specifies the method of controlling the engine speed and the combined output torque of the engine and at least one traction motor in each of the operating modes. Transitions among operating modes occur in response to driver movement of a shift lever, driver operation of shift selectors, and changes in vehicle speed.