A hybrid towel dispenser is provided that is operable in an automatic dispensing mode and a manual dispensing mode. The dispenser comprises a rotatable drum having a retractable knife that extends out of the drum when the drum rotates past a selected position and severs a towel segment from a towe l sheet that engages the cutting drum; a motor; a one-way bearing coupling the motor to the drum such that the motor rotates the drum in the automatic dispensing mode and a user can rotate the drum in the manual dispensing mode separately from the motor. The dispenser can additionally have a manual advance assembly with a lever rotationally coupled to the cutting drum and operable by the user to rotate the drum in the manual dispensing mode.</SDOA B>
