In this paper, a two-layer control approach for maximizing fuel economy by considering actual traffic conditions has been developed. Compared with previous studies, this work proposes a novel strategy to optimize both the vehicle speed and transmission gear position. Based on the road map information, engine and vehicle parameters, the upper layer optimizes the vehicle speed and gear position simultaneously using dynamic programming (DP) algorithm, which can be planned before departure. The lower layer is used to follow the pre-computed optimal trajectories while respecting speed limit and safe distance constraint with the preceding vehicle. Model predictive control (MPC) is used to track the optimal speed while ensuring safe distance constraint. For gear shifting, an online framework assuring the tracking of the optimal gear position is developed. To evaluate the effectiveness of the proposed approach, comprehensive numerical tests are conducted. Simulation results show that the proposed approach leads to a significant increase in fuel economy under traffic. The average computational time of the online optimization is 0.025 s, indicating its real-time capability.