Displacement downsize is an exciting technology for IC engines in recent years in order to reduce both toxic emissions and fuel consumption simultaneously. The key point of this technology is to increase power density so that a downsized engine has power output high enough to replace a bigger displacement one. This paper describes a research into the power output enhancement by combustion system optimization. This research work was conducted on a single-cylinder diesel engine with a displacement of 2.8L. The aim of the research is to increase engine power output from current 73kW to 150kW. The power output was firstly boosted to 92kW by virtue of increasing intake pressure, reducing intake flow resistance, optimizing cam profile, modifying fuel injection system and optimizing combustion parameters. As a result, a satisfied heat release pattern was obtained with the achievement of the power target. The power output was then further increased to 150kW by further increasing intake pressure, rising engine speed, further combustion parametric optimization, as well as using an electronic unit pump with a high injection pressure instead of the mechanical pump. After these optimizations the power output reaches to its final target of 150kW. However, the heat release during the late stage of combustion was significantly increased, causing an increase of 70°C in exhaust temperature. Further optimization work is still needed for the combustion system so as to increase heat release in the diffusion combustion period and decrease heat release in the late stage of combustion process.