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Bio-ethanol is used in many areas of the world as ethanol blended gasoline at low concentrations such as “E10 gasoline”. In this study, a method was examined to effectively use this small amount of ethanol within ethanol blended gasoline to improve thermal efficiency and high-load performance in a high-compression-ratio engine. Ethanol blended gasoline was separated into high-concentration ethanol fuel and gasoline using a fuel separation system employing a membrane. High-ethanol-concentration fuel was selectively used at high-load conditions to suppress knocking. In this system, a method to decrease ethanol consumption is necessary to cover the wide range of engine operation. Lower ethanol consumption could be achieved by Miller-cycle operation because decrease of the effective compression ratio suppresses knocking. However, high-load operation was limited due to the decrease in intake air volume with Miller-cycle operation.