In this paper, a Chattering-Free Sliding Mode (CFSM) optimum controller is proposed to control Auxiliary Power Unit (APU) of series hybrid electric vehicles. Asymptotic stability of the controller is proven using Lyapunov's second theorem. The stability is guaranteed under the model uncertainties. The controller eliminates the discontinuity in control signal so that it doesn't include chattering which is an important problem of conventional sliding mode controllers. The APU includes a 160PS Cummins diesel engine and 100kW PMSM generator provided by UQM, Inc. The CFSM controller performs the engine speed control of the APU. Engine/generator torque of the APU is controlled by the existing generator driver so that the APU can be operated at its optimum operating points as well as providing requested powers. An optimization algorithm is used to determine optimum operating points of the APU. The controller was tested on the real system and experimental results are given. In spite of the simple modeling approach taken to model the engine dynamics, an improved performance is achieved by the CFSM controller in terms of set point tracking, transient performance and disturbance rejection.