In general, diesel engines have an efficiency of about 35% and hence, a considerable amount of energy is expelled to the ambient air. In water-cooled engines, about 25%, 33% and 7% of the input energy are wasted in the coolant, exhaust gas, and friction, respectively. The heat from the exhaust gas of diesel engines can be an important heat source to provide additional power and improve overall engine efficiency. Studies related to the application of recoverable heat to produce additional power in medium capacity diesel engines (< 100 kW) using separate Rankine cycle are scarce. To recover heat from the exhaust of the engine, an efficient heat exchanger is necessary. For this type of application, the heat exchangers are needed to be designed in such a way that it can handle the heat load with reasonable size, weight and pressure drop. This paper describes the study of a diesel generator-set attached with an exhaust heat recovery system. Superheated steam was produced by using two heat exchangers. In authors’ previous study, optimizations using CFD simulations were carried out to design heat exchangers to extract the exhaust heat more effectively. Then, in this research, optimized heat exchangers were manufactured and tests were performed with water/steam as the working fluid. The optimum pressures of the working fluid were found to be 3, 5, 8 and 15 bar at 10.6, 16.1, 21.5, and 26.6 kW of engine powers, respectively. At these optimum pressures, correspondingly 0.34, 0.74, 1.78, 2.71 kW additional powers were produced. At the rated power of 26.6 kW the heat recovery system produced an additional power of 2.71 kW which reduced the brake specific consumption (bsfc) by 11.1%. However, at 40% part load, this bsfc improvement was 3% due to lower exhaust temperature.