This paper describes the development of a spark ignition engine operating in a stratified-EGR mode at part load. The concept is to reduce the pumping loss with high levels of EGR while maintaining stable combustion via charge stratification. Since the engine operates stoichiometrically, the ability to control NOx emissions by the three-way catalyst is retained. The configuration of introducing the stoichiometric fresh mixture to the center portion of the combustion chamber with the EGR gas on the two sides is visualized in a transparent engine using planar laser-induced fluorescence (PLIF) and Mie scattering. Visualization results showed that the stratification between air/fuel mixture and EGR gas was relatively well established during the intake stroke. There was, however, significant mixing in the late part of the compression stroke. Performance comparison (at the same fuel flow and at MBT spark timing) between the engine operating at part load with the homogeneous mixture and with the stratified mixture demonstrated that the stratified mode had greatly improved specific fuel consumption and had provided stable combustion at high EGR dilution. A simple combustion model based on a local EGR level which is an empirical function of the mass fraction burned was used to explain the data. The observed pressure trace and heat release rate could be reproduced well by the model.