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In recent years, small diesel engines for industrial use are required to achieve still higher power output per engine size (higher power density) and to have the performance to comply with stringent exhaust emissions standards as well. Therefore, engine makers need to meet these two demands in a short term. In this paper, we introduced techniques for lower exhaust emissions such as optimization of combustion system and higher power density such as reduction of heat load, noise and vibration. These techniques were utilized in process of a new DI diesel engine development effectively.