The cascaded thermal storage technique has emerged as an important solution for efficient conversion and utilization of thermal energies. In this paper, an exergy optimization was performed for cascaded latent cold/heat storage using multi-stage heat engine model. The optimization solution for both heat storage and cold storage systems was obtained, which was used for guiding the selection of PCMs with two examples presented. Cascaded thermal storage with increased stage number can not only extend temperature band for multi-grade thermal energy, but also reduce the exergy of the outlet HTF. It was found that heat transfer enhancement (improving NTU) is very necessary for a cascaded thermal storage system. The COP of cold energy may be greater than 1, which is also higher than that of heat for the same temperature difference in a cascaded thermal storage system. The increased environment temperature improves the COP of the cascaded cold storage (from 0.54 to 0.68) but reduces that of the cascaded heat storage (from 0.42 to 0.366). In the practical design of the cascaded thermal storage system, the stage number should be determined by balancing economics and system complexity.