The advance in research and development will make the deployment of automated vehicles a reality in the near future. The principal question is whether these technologies will lead to any benefits in terms of safety, capacity and traffic flow characteristics as they penetrate the current transportation system. Another aspect is how to exploit these technologies in order to achieve benefits without adversely affecting the efficiency of the current transportation system and the drivers who cannot afford them. The penetration of automated vehicles into the existing transportation system will lead to mixed traffic where they will coexist with manually driven vehicles. The controversial class is where automated vehicles are allowed to mix with manually driven vehicles. The motivation behind this concept is that the current roadway will not have to undergo any major changes. Vehicles will become more and more automated independent of AHS and should have the ability to operate in lanes with manually driven vehicles. As the number of automated vehicles increases, the benefits of automation will increase until saturation, where all vehicles will be automated in the same way with cruise control, air-bags, etc. At the initial stage, vehicles will be semi-automated with the capability to follow each other automatically in the same lane. These semi-automated vehicles will coexist with manually driven vehicles on the same roadway system. The purpose of this report is to analyze the requirements, issues and effects on safety and efficiency that will result from allowing semi-automated and fully-automated vehicles to operate on the existing highway system together with manually driven vehicles. Two scenarios are considered : in the first scenario no changes are assumed for the current roadway system. In the second scenario it is assumed that the roadway controls the flow of traffic by issuing speed commands to both automated and manual vehicles. The roadway communicates via a roadway/vehicle communication with the automated vehicles system and through variable message signs with the manually driven vehicles. It is found that a number of safety and human factors issues present in both scenarios need to be resolved and studied further before mixing of semi-automated/fully-automated vehicles with manual ones becomes possible. Full automation will eliminate the driver out of the driving loop which will have serious safety implications some of which are raised and analyzed. In addition the interaction of fully automated vehicles with manual ones pose several safety problems due to the unpredictable behavior of the drivers of the manual vehicles. The effects on capacity with respect to the percentage of semi-automated vehicles penetrating the system and the derating factor due to possible lane changes are analyzed. Theoretically as the percentage of semi-automated vehicles increases, capacity also increases in most cases due to the shorter headways of the semi-automated vehicles. In practice this may not be always the case due to the unpredictability of the manually driven vehicles and the randomness of the headway used by different drivers which may further change due to presence of the semi-automated vehicles. Simulations reveal that significant improvement in the traffic flow can be achieved with a high degree of penetration of fully-automated vehicles in mixed traffic. Effects of lane- changing of fully-automated vehicles on mixed traffic capacity are analyzed. The lane- change derating factor is quantified as a function of market penetration of fully-automated vehicles for different percentages of automated vehicles changing lanes. One of the significant findings of this research is that a single semi-automated/fully- automated vehicle may attenuate large disturbances caused by rapid accelerations/decelerations and prevent the slinky effect from propagating. This attenuation is shown to take place without any effect on the travel time. The stopping of the propagation of large acceleration/deceleration transients by the automated vehicle will have positive effects on fuel consumption and pollution. KEYWORDS Automated Highway Systems (AHS), Semi-automated Vehicle, Fully- automated/Automated Vehicle, Manual/Manually driven Vehicle, Intelligent Cruise Control (ICC), Frontal Collision Warning System (FCW), Frontal Collision Avoidance System (FCA), Variable Message Signs (VMS), Roadway/Vehicle Communication System (RVCS), Degree of Penetration, Throughput, Headway, Merge Derating Factor, Slinky-effect, Sensors, Actuators, Vehicle-to-Vehicle Communication, Zone of Relevance, Global Positioning System (GPS), Minimum Safety Spacing (MSS)