Like with the passenger car and transit bus markets, school buses can benefit from plug-in hybrid technology. Advanced Energy Corporation established the Plug-in Hybrid Electric School Bus (HESB) project to create the demand for plug-in hybrid school buses required for a bus manufacturer to invest in the development of this technology. Nationwide 12 school districts in NY, PA, VA, DC, NC, SC, FL, LA, AK, TX, WA, and CA have purchased 19 plug-in hybrid buses in the project with all buses to be delivered by the end of 2007. Each bus is a type-C school bus with a VT365, 200-215 hp diesel engine by IC Corporation, a 25/80-kW AC induction motor and hybrid drivetrain from Enova Systems, and a 330-V Li-ion battery pack from Valence Technologies. The total cost of each bus ranges from $200,000-$220,000, including an estimated $140,000 premium for the plug-in hybrid system. This paper addresses the specific challenges that face the transportation industry as a whole, summarizes earlier studies that demonstrate the technical and economical feasibility of plug-in hybrid school buses, describes the HESB project, and draws future plans to show why hybrids are an excellent solution for the school bus market.