A system and method of controlling engine clutch engagement during TCS operation of a hybrid vehicle are provided. The method includes determining whether a TCS is operating and upon determining that the TCS is operating, determining a compensation value for early engagement of an engine clutch during the TCS operation based on a difference between a front wheel speed and a rear wheel speed and a slip amount of front wheels. Additionally, the method includes determining whether engagement of the engine clutch is capable of being started based on the compensation value and starting the engine clutch engagement. Since the engagement of the engine clutch is controlled based on the speed of non-drive wheels during TCS operation, the engagement stability of the engine clutch is improved and the amount of time required to engage the engine clutch is decreased.