A topology optimization method for phononic crystals is developed for the design of sound barriers, using the level set approach. Given a frequency and an incident wave to the phononic crystals, an optimal shape of periodic inclusions is found by minimizing the norm of transmittance. In a sound field including scattering bodies, an acoustic wave can be refracted on the obstacle boundaries, which enables to control acoustic performance by taking the shape of inclusions as the design variables. In this research, we consider a layered structure which is composed of inclusions arranged periodically in horizontal direction while finite inclusions are distributed in vertical direction. Due to the periodicity of inclusions, a unit cell can be considered to analyze the wave propagation together with proper boundary conditions which are imposed on the left and right edges of the unit cell using the Bloch theorem. The boundary conditions for the lower and the upper boundaries of unit cell are described by impedance matrices, which represent the transmission of waves between the layered structure and the semi-infinite external media. A level set method is employed to describe the topology and the shape of inclusions. In the level set method, the initial domain is kept fixed and its boundary is represented by an implicit moving boundary embedded in the level set function, which facilitates to handle complicated topological shape changes. Through several numerical examples, the applicability of the proposed method is demonstrated.