In order to reach the goal of CO2 emission regulation in European market by 2012, Hyundai-Kia Motor has been developed the new diesel engine with downsizing concept for the purpose of substitution of 2.0 L engine on D-segment vehicles. The main development strategy is to find the optimized combustion matching with new chamber design, optimal injection- and enhanced turbocharging system including advanced intake management. Also extensive hardware investigation from aspects of friction reduction and thermal management has been performed to improve the fuel consumption. Through the sharing and modulation of parts with series platform it was possible to spread strategy with maximized synergies and also cost reduction. The new small displacement diesel engine with low fuel consumption characteristic is able to achieve the attractive driving performance, fulfill EURO-V emission regulation and also enough to estimate the potential of future emission standards.