A hybrid electro-hydraulic drive system is provided for a vehicle and comprises a hydraulic transmission including a first hydraulic machine and at least one second hydraulic machine drivingly connected to drive wheels of the motor vehicle for driving thereof, an electric motor/generator operatively connected to the first hydraulic machine, and at least one energy storage device operable to store and release a hydraulic fluid energy or an electrical energy. The second hydraulic machine is a reversible hydraulic pump/motor unit capable to function both as a hydraulic pump and a hydraulic motor. The energy storage device is operatively connected to either the hydraulic transmission or the electric motor/generator. In a retarding mode the hydraulic transmission and/or the electric motor/generator retard the vehicle, while in a driving mode they supply a supplementary power to the drive wheels to assist propulsion of the vehicle.