Excellent fuel economy and high performance have been urgent in Japanese automobile industries. With increasing engine power, many of the power train components have to withstand higher loads. Differential pinion gear being one of those highly stressed parts, excellent fatigue and shock resistance have been demanded. At first the fundamental study on the fatigue and impact crack behavior of carburized components was studied and the new grade composed of 0.18%C-0.7%Mn-1.0%Cr-0.4%Mo was alloy designed. Furthermore, Si and P is reduced less than 0.15 and 0.015%, respectively aiming at the reduction of intergranular oxidation and improved case toughness. The differential gear assembly test has proved that the new grade shows three times as high impact strength as that of conventional steel, SCM418, and almost the same as that of SNCM420 containing 1.8%Ni. The new grade has been applied to highly stressed pinion-mate gear and has contributed greatly to the production of high performance automobile.