Developing public transportation and giving priority to buses is a feasible solution for improving the level of public transportation service, which facilitates congestion alleviation and prevention, and contributes to urban development and city sustainability. This paper presents a novel bus operation control strategy including both holding control and speed control to improve the level of service of transit systems within a connected vehicle environment. Most previous work focuses on optimization of signal timing to decrease the bus signal delay by assuming that holding control is not applied; the speed of buses is given as a constant input and the acceleration and deceleration processes of buses can be neglected. This paper explores the benefits of a bus operation control strategy to minimize the total cost, which includes bus signal delay, bus holding delay, bus travel delay, acceleration cost due to frequent stops and intense driving. A set of formulations are developed to explicitly capture the interaction between bus holding control and speed control. Experimental analysisand simulation tests have shown that the proposed integrated operational model outperforms the traditional control, speed control only, or holding control only strategies in terms of reducing the total cost of buses. The sensitivity analysis has further demonstrated the potential effectiveness of the proposed approach to be applied in a real-time bus operation control system under different levels of traffic demand, bus stop locations, and speed limits.