In order to optimize the efficiency of a parallel hybrid hydraulic excavator (PHHE), this paper firstly get started with the analysis of the system's structure, and then the optimal objective function and constraint equations that depict powertrain unit and energy storage unit for PHHE were put forward along with a parameter matching method for the machine. For the purpose of component sizing and matching in PHHE, one case was done in a 5 ton hybrid excavator, and the system with the designed parameters of components could reduce components' peak power, increase system efficiency and decrease fuel consumption rate by using Matlab and Simulink toolbox.