In auto industry extensive use of traditional IC engines and fossil fuel as power source has lead to serious environmental problems and social issues. Development of hybrid vehicles is a hopeful technology to solve above problems. As a vital part of IC engine-electric hybrid vehicles, power source should generate electricity efficiently. Supported by National High-tech R&D Program (863 Program) a novel Internal Combustion Linear-Generator Integrated Power System (ICLG) is researched in this paper. ICLG mainly consists of four-stroke free-piston engine, linear motor, reversible electrical energy storage device, and control unit and has the potential to convert the chemical energy of fuel to electrical energy efficiently. Achievements for improving efficiency, such as minimizing the energy transmission and conversion link, movement control of piston by adjusting electromagnetic force, optimization of thermodynamic cycle, and sub-cylinder or sub-cylinders mode, are analyzed and validated by testing. Testing results show that the generating efficiency is about 32%, which can be improved by further study. ICLG is hopeful to be the new generation power source of hybrid vehicles which has the character of power saving and environmental protecting.