The thermodynamic simulation model for the performance of a 4-stroke, direct-injection (DI), variable compression ratio (rc), diesel engine, previously developed by the authors , is used to investigate the effect of varying compression ratio (rc) on engine brake power and torque and engine soot and NOx emissions. An optimization analysis is conducted to an engine with specifications similar to HELWAAN M114 under normal operating conditions to seek optimum rc variation to achieve some specific targets. For constant maximum brake power or constant minimum soot emission, the analysis shows an enormous increase in maximum cylinder pressure inside the variable rc engine reaching about 19.8 MPa compared to 10.7 MPa for constant rc engine, which means difficult practical applicability. For constant maximum brake torque, the optimized variation of rc lies within the range of 16.4 to 19.3. This results in advantages over constant rc engine: a reduction in bsfc and soot emission by about 15.7 % and 46.9 % respectively, and an increase in brake power by about 17.7 %. Some drawbacks include an increase in NOx, Pmax and Tmax by about 95 %, 24.4 % and 9 % respectively. For constant minimum NOx, the optimization results in reduction of brake power by about 5.8 %, and an increase in bsfc, and soot emission by about 1.5 % and 30.8 % respectively.A direct-injection diesel engine can be safely operated with variable compression ratio to achieve constant maximum brake torque or constant minimum NOx over the whole engine speed range (1500-2800 rpm) but, can not be safely operated with rc to achieve neither constant maximum brake power (beyond engine speed 2250 rpm) nor minimum soot emission over any speed range.