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This research proposes a control system for Spark Ignition (SI) engines with external Exhaust Gas Recirculation (EGR) based on model predictive control and a disturbance observer. The proposed Economic Nonlinear Model Predictive Controller (E-NMPC) tries to minimize fuel consumption for a number of engine cycles into the future given an Indicated Mean Effective Pressure (IMEP) tracking reference and abnormal combustion constraints like knock and combustion variability. A nonlinear optimization problem is formulated and solved in real time using Sequential Quadratic Programming (SQP) to obtain the desired control actuator set-points. An Extended Kalman Filter (EKF) based observer is applied to estimate engine states, combining both air path and cylinder dynamics. The EKF engine state(s) observer is augmented with disturbance estimation to account for modeling errors and/or sensor/actuator offset.