This research concerns a numerical optimization method for designing helicopter rotor blades in hover based on adjoint method and by using a coupled free wake-CFD approach for proper calculation of aerodynamic loads. The Euler flow solver and adjoint equations are formulated in a rotating coordinate system. The rotor wake effects are modeled by a free wake method and included into the CFD calculation. The approach is applied for the redesign of a transonic Caradonna-Tung two-bladed rotor through minor surface changes. The inviscid torque was reduced about 15% from that of original rotor due the reduction of wave drag. Results show this technique is capable of converging to the optimum aerodynamic shape of rotor blades with minimum inviscid rotor torque coefficient under fixed thrust constraint. The advantage of this method is that satisfactory results can be achieved by minimum computational efforts, particularly for the grid generation problem and the required CPU time. Keywords Optimization, Adjoint method, Rotor blades, Compressibility drag, Euler equations, Free wake.