This work describes a design and optimization method for developing hybrid, multi-material, compliant instruments which are expected to be useful in mini-laparoscopy and natural orifice translumenal endoscopic surgery. These two-material devices are designed specifically for Penn State's lost mold rapid infiltration process, which is capable of fabricating hundreds of freestanding meso-scale parts in parallel. New narrow-gauge surgical procedures impose severe geometric constraints that challenge traditional compliant mechanism design methods. Since narrow-gauge constraints leave geometry optimization ineffective, new design methods are explored to improve the performance of a 1 mm diameter contact-aided compliant forceps. By considering hybrid designs, new design possibilities are enabled through material variation. The hybrid forceps has desired regions of flexibility and stiffness that can be isolated to improve tool performance. For instance, a hybrid forceps can be designed with greater flexibility in some regions to provide larger jaw openings while maintaining high stiffness in other regions to obtain large grasping forces, both vital features in a surgical forceps. Using ANSYS to model large deformation and contact, an optimization problem is formulated to maximize tool performance and to determine optimal segregation of hybrid materials considering a range of modulus ratios. Materials under consideration include nanoparticulate 3 mol% yttria partially stabilized zirconia (3YSZ) and austenitic (300 series) stainless steel. All results are compared to previously optimized homogeneous designs.