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The use of ceramic insulation to reduce engine heat loss and thus improve fuel economy was examined but found to be detrimental rather than advantageous. This paper analyzes the reasons and presents an alternative approach, namely minimizing the heat transfer area. Experiments were conducted to determine the effects of surface smoothness on BSFC, output torque, heat release rate and piston temperature. It was found that with a mirror-finished combustion chamber, heat loss is decreased and consequently engine output is raised, while fuel consumption is lowered. The percentage reduction in heat loss was ascertained by numerically simulating combustion and was confirmed by FEM analysis of piston thermal distribution.