To overcome recent emission regulation, various hybrid systems are being developed. In the E-4WD(electric four wheel drive) system, the engine and transmission drive the front wheel, electric motor and single reduction gear drive the rear wheel. As the gear ratio of the reduction gear set determines the electric motor's operating point, the gear ratio is important to enhancement efficiency of hybrid system. This study is to analyze motor reduction gear ratio's influence on E-4WD hybrid system for optimized efficiency and driving performance. Fuel economy, operating point of power source and hybrid mode are analyzed using simulation developed with dynamic programming method.