This paper focuses on the dynamic modeling and counterweight optimization of the two degree of freedom planar parallel manipulator, which is a subpart of a hybrid machine tool. Based on a kinematic analysis, the dynamic equation is derived by using the Newton-Euler approach. Then, three counterweight modes are presented for the parallel manipulator. According to the cutting force model and motion planning of the cutting tool, the dynamic simulations with three counterweight modes are performed, and the mass of counterweight in each counterweight mode is optimized by minimizing the sum of mean square values of actuator forces. The simulations show that the optimal mass of counterweights does not equal the total mass of moving parts of the parallel manipulator, and each counterweight mode has its advantage and disadvantage. Considering the ease in which a counterweight can be implemented, the counterweight mode where two counterweights are connected to two sliders is adopted for the parallel manipulator.