The new Nissan 1.7 liter 4 cylinder diesel engine has been developed to meet the social requirements for energy conservation. The main objective was to improve fuel economy without sacrificing driveability, and this has been achieved by minimizing engine weight, reducing mechanical friction loss and optimizing the combustion system. The CA series gasoline engine, which is known for its light weight, was chosen as the base engine for dieselization. The swirl chamber combustion system used for the LD28 engine was modified to satisfy the requirements for high power, good fuel economy and low noise. Engine noise has been reduced with the aid of several analytical methods such as laser holography. Special attention has been paid to the reduction of diesel knock which is most offensive to the ear. To install this engine in a small FWD vehicle transversely, much effort went into the minimizing of the engine length and width.This paper deals with the design characteristics of the engine components and the development highlights.