The cylinder of the aluminum engine block without iron sleeve was coated directly with thin thermal barrier coatings of zirconia and chrome oxide. The cylinder head and valve face and the piston crown were also coated. These three engine components were tested individually and together. The fuel consumption performance of this 84 x 70 mm direct injection diesel engine improved 10% with only coated cylinder bore.When the fuel injection timing of the coated cylinder bore engine was retarded by about 2°CA, emissions characteristics were approximately the same level as for the baseline engine with 8% improvement in brake specific fuel consumption compared with the baseline engine.At constant fuel flow rate to the engine, the exhaust and cylinder head temperatures were higher for the insulated bore case. One can summarize the combustion temperature must have been higher and heat release rates were faster in the insulated case. Although contributing factors for the improvement are unknown at this time, it is believed to be a result of 1) friction improvement, 2) combustion improvement, and 3) thermal insulation. These factors are discussed in the paper.