The design method for marine propulsor (propeller/stator) is presented for an autonomous underwater vehicle (AUV) that operates at a very high loading condition. The design method is applied to Virginia Tech Dragon AUV. It is based on the parametric geometry definition for the propulsor, use of high-fidelity CFD RANSE solver with the transition model, construction of the surrogate model, and multi-objective genetic optimization algorithm. The CFD model is validated using the paint pattern visualization on the surface of the propeller for an open propeller at model scale. The CFD model is then applied to study hydrodynamics of ducted propellers such as forces and moments, tip leakage vortex, leading-edge flow separation, and counter-rotating vortices formed at the duct trailing edge. The effect of variation of thickness for stator blades and different approaches for modeling the postswirl stator is presented. The field trials for Dragon AUV shows that there is a good correlation between expected and achieved design speed under tow condition with the designed base propulsor. The marine propulsor design is further improved with an objective to maximize the propulsive efficiency and minimize the rolling of AUV. The stator is found to eliminate the swirl component of velocity present in the wake of the propeller to the maximum extent. The propulsor designed using this method (surrogate-based optimization) is demonstrated to have an improved torque balance characteristic with a slight improvement in efficiency than the base propulsor design.