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This study considers the relatively high fuel consumption of small-displacement Diesel engines and seeks to improve it through thin ceramic thermal barrier coatings. A small displacement (219 cc) single-cylinder direct-injection production Diesel engine is utilized. A Ricardo WAVE simulation is developed and suggests that through simultaneous application of the coatings and reduction of compression ratio, the fuel consumption can be improved through a reduction in thermal losses. At the stock compression ratio, the application of thermal barrier coatings does not improve fuel consumption unless injection timing is carefully controlled. When injection timing is also adjusted, fuel consumption can be improved by up to 10%, particularly at low loads, with application of the thermal barrier coatings. The data show higher rates of energy release, higher peak pressures, leading to the lower fuel consumption.