This research focused on the optimization of inventory allocation strategies for two-echelon system involving rental and sales demand. With the rising popularity of renting products alongside traditional sales, it is essential for companies to effectively manage their inventory to meet the demands of both types. This research investigated the challenges associated with two types of demands, which follow individual distributions due to the differing preferences of customers. Additionally, we explored the concept of two-echelon inventory allocation, which involves distributing inventory between a supplier and a retailer. This study aimed to develop a comprehensive framework for inventory allocation which considers the unique characteristics of the rental market. The approach was proposed to determine the lot size of the supplier to meet the target service level and allocate inventory to rental and sales, respectively. To achieve our objective, this research employed methods such as mathematical formulation and optimization techniques. We expect that our research will provide valuable insights into improving inventory management practices in dual inventory systems, ultimately leading to enhanced management of the rental market.