Variable compression ratio in conjunction with a control system is an effective way to improve performance and reduce emissions in a diesel engine. There are various methods that may be employed that include geometry changes and varying valve timing to change the effective compression ratio. In this paper, a simulation study is presented that is based on a modern, multi-cylinder, fixed compression ratio diesel engine equipped with exhaust gas recirculation (EGR) and a variable geometry turbocharger (VGT). The engine is represented using the GT-Power code, and includes a predictive combustion model. The aim of the investigation is to identify the impact of variable compression ratio on fuel economy and emission reduction and whether realistic optimal conditions exist. This paper describes how a formal design of experiments procedure is used to define the simulation conditions. Cost functions are defined with different weights for fuel consumption, NOx and soot emissions. The presentation of optimal simulation results map shows the best operating point in relation with corresponding compression ratio, EGR percentage and VGT strategy across the load range of the engine. The results demonstrate that the variation of compression ratio with engine operating conditions can achieve fuel consumption benefits while meeting current exhaust emissions requirements.