The facility location and size are important factors that affect operation cost and service quality of supply chain, and also two decisive factors for enterprises to gain competitive advantage. In order to optimize facility location and size simultaneously, a mixed integer programming model is formulated to minimize the total costs, and to decide the location of plants and depots, select sizes for the plants, determine the product flows from the plants to the depots and assign the customers to the depots. According to characteristics of the problem model, a Lagrangian relaxation algorithm is designed to solve the problem, and a hybrid simulated annealing tabu search algorithm is developed to further improve the solution quality. To test the validity of the proposed algorithm, a large number of randomly generated instances of different sizes and parameters are provided. The numerical results indicate that the proposed algorithm is effective and efficient for the two-echelon facility location problem with choice of facility size.