Meeting ever-tightening emission regulations and ambitious climate targets requires drastic efficiency improvements and emission reduction across all sectors. Hybridization as an intermediary step towards electrification is a prominent approach to achieve this. Within the forestry sector, most equipment still relies on conventional mechanical or hydraulical drivetrains. This work focuses on the design of hybrid tower yarder drivetrains, in order to facilitate the technological transition to more sustainable equipment. Tower yarder duty cycle data are extracted from the literature and organized into a set of reference duty cycle data via Matlab simulations. Based on typical performance requirements, various technological solutions are studied for the following key tower yarder subsystems: energy storage, winch drive, energy source, and energy dissipation. The objective is to determine the most performing design considering system cost, performance, weight, and durability. Challenging control considerations are discussed and control algorithms are presented. Further presented are drivetrain architecture alternatives to boost overall efficiency. The best hybrid drivetrain, based on a large set of operation data gathered from other studies, is finally subjected to design calculations and a case study involving a 5-ton tower yarder. Results indicate that off-the-shelf electric drives, reduction gearing, and energy dissipation systems can satisfy all performance requirements, including a maximum power of about 100 kW per drive. A 15–45 kWh power-dense battery pack or a 100 kWh energy-dense battery pack may be required to cope with a power of up to 70 kW RMS, pointing to a need for substantial overdesign and confirming that the energy storage system represents the largest design challenge. The engine should achieve at least 41.5 kW of power to compensate for combined average net energy consumption in the yarder. These results confirm the feasibility of tower yarder hybridization and the large potential for energy recovery. This is especially true in the closed-loop setup, with a recovered energy of up to 5 kWh per transport cycle. Finally, differences between the proposed optimal design and the commercial hybrid design by Koller Forsttechnik are discussed.