A two-body wave energy converter oscillating in heave is studied in this paper. The energy is extracted through the relative motion between the floating and submerged bodies. A linearized model in the frequency domain is adopted to study the dynamics of such a two-body system with consideration of both the linear viscous damping and the hydrodynamic damping. The closed form solution of the maximum absorption power and corresponding power takeoff parameters are obtained. The suboptimal and optimal designs for a two-body system are proposed based on the closed form solution. The physical insight of the optimal design is to have one of the damped natural frequencies of the two body system the same as, or as close as possible to, the excitation frequency. A case study is conducted to investigate the influence of the submerged body on the absorption power of a two-body system subjected to suboptimal and optimal design under regular and irregular wave excitations. It is found that the absorption power of the two-body system can be significantly higher than that of the single body system with the same floating buoy in both regular and irregular waves. In regular waves, it is found that the mass of the submerged body should be designed with an optimal value in order to achieve the maximum absorption power for a given floating buoy in the presence of viscous damping. The viscous damping on the submerged body should be as small as possible for a given mass in both regular and irregular waves.