A power system for an electric motor drive such as may be used in an electrically propelled vehicle incorporates the combination of a high power density battery and a high energy density battery to provide an optimal combination of high energy and high power, i.e., a hybrid battery system. The hybrid battery system in one form includes components which prevent electrical recharge energy from being applied to the high energy density battery while capturing regenerative energy in the high power density battery so as to increase an electric vehicle's range for a given amount of stored energy. A dynamic retarding function for absorbing electrical regenerative energy is used during significant vehicle deceleration and while holding speed on down-hill grades, to minimize mechanical brake wear and limit excessive voltage on the battery and power electronic control devices. The high energy density battery coupled in circuit with a boost converter, a high power density battery, a dynamic retarder, and an AC motor drive circuit. The hybrid battery system is controlled by a hybrid power source controller which receives signals from a vehicle system controller using current and voltage sensors to provide feedback parameters for the closed-loop hybrid battery control functions.