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Controlled Auto Ignition (CAI) uses compression heat to auto ignite a homogeneous air/fuel mixture. Using internal exhaust gas recirculation (IEGR) as an indirect control method, CAI offers superior fuel economy and pollutant emission reductions. Practically, this can readily be achieved by a method of early exhaust valve closure and late inlet valve opening to trap exhaust gas residuals within the cylinder from one cycle to the next. In order to understand the combustion mechanism, we did a comprehensive investigation on CAI fuelled with iso-octane. Test data was gathered from a single cylinder research engine equipped with Lotus' Research Active Valve Train (AVT) System, and the modelling study was based on detailed chemical kinetics. It was found that CAI can only occur when the thermal energy of the engine charge, which is a mixture of air / fuel and IEGR, reaches a certain level.