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This paper describes an experimental study to determine the potential for fuel efficiency improvements offered by dedicated, high compression E85 engines with optimized powertrain calibration strategies. The study involved a prototype variable fuel engine that could operate using either gasoline or E85, and a high compression version of the same engine that was suitable only for E85. Fuel consumption and engine-out emissions were evaluated using steady-state engine dynamometer tests to represent urban and highway speed/load conditions. For each fuel and engine combination, the fuel efficiency and emissions trade-offs provided by varying Exhaust Gas Recirculation (EGR) levels were determined. For the high compression engine, operation at lower speed/higher load conditions (producing the same power as the standard speed/load settings) was also investigated.