This paper describes the Type CL engine, the smallest three-cylinder, one-litre, diesel engine ever produced in the world for use in passenger cars. This engine, mounted in the New Charade car, achieved a surprisingly low fuel consumption record of 4.8 litre/100km(urban driving). In this Type CL engine, efficient combustion takes place over a wide range from low-speed, low-load to high-speed, high-load, despite the fact that the small displacement diesel engine has hitherto posed various problems from the viewpoint of combustion. Hence, the engine is capable of delivering 27 KW, 60 Nm/993 cc, that is a very high specific output. Among various problems which have been encountered during the development process of this engine, this paper will explain using concrete examples specifically the matching of the injection system, the optimum setting of the combustion chamber-related components and the low-mechanical loss design, which have great effects on the achievement of a high fuel efficiency.