An analysis was made of the effect of insulation strategy on diesel engine heat transfer, performance and structure temperatures. The analysis was made using a thermodynamic cycle code with a new heat transfer correlation which takes into account the gas velocity and turbulent intensity and provides a spatially and time resolved description of the heat transfer process. The cycle code is directly coupled to a steady state heat conduction code representing the engine structure, and a transient heat conduction code tracking wall temperature swings along the combustion chamber surfaces. The study concentrated on the effects of different insulation strategies and insulating materials placed at various locations within the combustion chamber. Among the outputs of these analyses were the thermodynamic efficiency, peak firing pressure, exhaust gas temperature, component temperatures (time-average and maximum), volumetric efficiency, major heat paths and fuel energy balance.