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A large amount of the heat generated during the engine combustion process is lost to the coolant system through the surrounding metal parts. Therefore, there is a potential to improve the overall cycle efficiency by reducing the amount of heat transfer from the engine. In this paper, a Computational Fluid Dynamics (CFD) tool has been used to evaluate the effects of a number of design and operating variables on total heat loss from an engine to the coolant system. These parameters include injection characteristics and orientation, shape of the piston bowl, percentage of EGR and material property of the combustion chamber. Comprehensive analyses have been presented to show the efficient use of the heat retained in the combustion chamber and its contribution to improve thermal efficiency of the engine. Finally, changes in design and operating parameters have been suggested based on the analytical results to improve heat loss reduction from an engine.