The heat release and pollutant formation processes in a direct injection natural gas engine are studied by coupling detailed chemistry with a multi-dimensional reactive flow code. A detailed kinetic mechanism consisting of 22 species and 104 elementary reactions is chosen by comparing ignition delay predictions with measurements in a combustion bomb. The ignition model is then coupled with a turbulent combustion model and extended Zeldovich kinetics to simulate heat release and nitric oxide production in a direct injection engine. Parametric studies are conducted to investigate the effect of engine operating conditions which include speed, load, injection timing and level of boost. It is shown that use of detailed chemistry is extremely important to predict the correct ignition delay period as engine operating conditions change. Use of both time and crank angle as the independent variable reveals interesting details of the heat release process as a function of engine speed. Nitric oxide formation is shown to depend on both local temperature and oxygen concentration and injection timing is found to be the single most important variable controlling it. A trade-off between early injection timing for higher IMEP and late timing for lower NO is required to get desirable performance from the engine while keeping the emission levels under control.