Ethanol offers significant potential for increasing the compression ratio of SI engines resulting from its high octane number and high latent heat of vaporization. A study was conducted to determine the knock-limited compression ratio of ethanol-gasoline blends to identify the potential for improved operating efficiency. To operate an SI engine in a flex fuel vehicle requires operating strategies that allow operation on a broad range of fuels from gasoline to E85. Since gasoline or low ethanol blend operation is inherently limited by knock at high loads, strategies must be identified which allow operation on these fuels with minimal fuel economy or power density tradeoffs.A single-cylinder direct-injection spark-ignited engine with fully variable hydraulic valve actuation (HVA) is operated at WOT and other high-load conditions to determine the knock-limited compression ratio (CR) of ethanol fuel blends. The geometric CR is varied by changing pistons, producing CR from 9.2 to 12.87. The effective CR is varied using an electro-hydraulic valve train that changed the effective trapped displacement using both Early Intake Valve Closing (EIVC) and Late Intake Valve Closing (LIVC). The EIVC and LIVC strategies result in effective CR being reduced while maintaining the geometric expansion ratio.It was found that at substantially similar engine conditions, increasing the ethanol content of the fuel results in higher engine efficiency and higher engine power. These results can be partially attributed to a charge cooling effect and a higher heating value of a stoichiometric mixture for ethanol blends (per unit mass of air). Additional thermodynamic effects on the ratio of specific heats (\yy) and a mole multiplier are also explored.It was also found that high CR can increase the efficiency of ethanol fuel blends, and as a result, the fuel economy penalty associated with the lower energy content of E85 can be reduced by about twenty percent. Such operation necessitates that the engine be operated in a de-rated manner for gasoline, which is knock-prone at these high CR, in order to maintain compatibility. By using early and late intake valve closing strategies, good efficiency is maintained with gasoline, but peak power is about 33% lower than with E85.