A hydrostatic dynamometer capable of accurately controlling the speed and torque of an engine has been designed and constructed. The thrust of this work is not only to build a better dynamometer, it is the first step in creating a system for laboratory simulation of the actual load environment of engines and powertrains. This paper presents the design, construction, and evaluation of a hydrostatic dynamometer. The evaluation includes speed and torque limits, and bandwidth of the dynamometer. Also, the dynamometer is compared with those in common use, and the feasibility of accurately reproducing the engine or powertrain load environments are assessed. This is the first phase of a development program; future research is discussed.