Traditionally automotive powertrain research and development have been conducted with electromagnetic dynamometers. The ever increasing demand for reducing fuel consumption and emissions has driven the innovation of new technologies in engines, transmissions, and hybrid systems, which in turn requires significant flexibilities and transient capabilities of the dynamometer. Given its superior power density, hydrostatic dynamometer is an ideal candidate for the next generation transient dynamometers. This paper presents the design, modeling, and control of a hydrostatic dynamometer as a precise torque device that could control the amount of torque supplied in real-time under both steady state and transient operations. The mathematical models are constructed for the system. Based on the analysis and simulation of the dynamic model, the dynamometer is decoupled into two subsystems. For the power output control subsystem, a nonlinear tracking controller based on feedback linearization and internal model principle is designed; for the operating pressure control subsystem, a PID regulator is designed. Simulation results in AMESim environment demonstrate the fast dynamic response and precise tracking capability of the proposed control system.