Hybrid VRF (hVRF) systems enjoy reduced refrigerant charge and wider selection of refrigerants compared to traditional VRF systems. However, due to relatively low heat transfer rate in the indoor coil, hVRF system COP is 10% lower than a traditional VRF system COP. To solve the COP degradation problem of hVRF system, a bi-objective optimization method was proposed for a water-based hVRF system that uses bifurcating bare-tube heat exchangers (bBTHX) as the indoor coils. The two objectives are minimizing bBTHX envelop volume and maximizing system COP. The optimization problem is separated into two steps. First, refrigerant loop parametric analysis was performed to determine the optimal water loop operating conditions. Next, bBTHX optimization was conducted subjected to the constraints of capacity requirements from step one and dimension limitations. Then we simulated the entire hVRF system with the optimal bBTHX designs and obtained the Pareto front between system COP and bBTHX volume.