In this paper, the authors proposed a method for on line rapid estimation of power performance and mechanical losses of engines.The power and mechanical losses of an engine are estimated based on the principle of inertia acceleration-deceleration and the measurement of transient crankshaft speed variation that were taken from the updated data acquisition processing measurement system. The calculation, feature and function of the on line rapid estimation methods are described. The derived power and mechanical losses using this method were compared to the results by dynamometer. The experimental equipment as well as the results are illustrated.Using this method, the characteristic mechanical efficiency of the engine as well as the cylinder's relative compression, starting and acceleration performance could also be estimated easily.The testing results of 4 and 6-cylinder engines show that the estimated measurement error is within ±2.5% for power, ±5% for torque over the whole speed range, and ±5% for cylinder relative compression. So it is a proper method and tool for on line estimation of power, mechanical losses and cylinder compression etc. of engines especially mounted in vehicles.