In this paper, a regenerative braking algorithm is proposed to make the maximum use of the regenerative braking energy for an independent front and rear motor drive parallel HEV. In the regenerative braking algorithm, the regenerative torque is determined by considering the motor capacity, motor efficiency, battery SOC, gear ratio, clutch state, engine speed and vehicle velocity. To implement the regenerative braking algorithm, HEV powertrain models including the internal combustion engine, electric motor, battery, manual transmission and the regenerative braking system are developed using MATLAB, and the regenerative braking performance is investigated by the simulator. Simulation results show that the proposed regenerative braking algorithm contributes to increasing the battery SOC, which recuperates 60 percent of the total braking energy while satisfying the design specification of the control logic. In addition, a control algorithm which limits the regenerative braking is suggested by considering the battery power capacity and dynamic response characteristics of the hydraulic control module.