A unique stepped-piston engine was developed by a group of research engineers at Universiti Teknologi Malaysia (UTM), from 2003 to 2005. The development work undertaken by them engulfs design, prototyping and evaluation over a predetermined period of time which was iterative and challenging in nature. The main objective of the program is to demonstrate local R&D capabilities on small engine work that is able to produce mobile powerhouse of comparable output, having low-fuel consumption and acceptable emission than its crankcase counterpart of similar displacement. A two-stroke engine work was selected as it posses a number of technological challenges, increase in its thermal efficiency, which upon successful undertakings will be useful in assisting the group in future powertrain undertakings in UTM. In its carbureted version, the single-cylinder air- cooled engine incorporates a three-port transfer system and a dedicated crankcase breather. These features will enable the prototype to have high induction efficiency and to behave very much a two-stroke engine but equipped with a four-stroke crankcase lubrication system. After a series of analytical work the engine was subjected to a series of laboratory trials. It was also tested on a small watercraft platform with promising indication of its flexibility of use as a prime mover in mobile platform. In an effort to further enhance its technology features, the researchers have also embarked on the development of an add-on auxiliary system. The system comprises of an engine control unit (ECU), a direct- injector unit, a dedicated lubricant dispenser unit and an embedded common rail fuel unit. This support system was incorporated onto the engine to demonstrate the finer points of environmental-friendly and fuel economy features. The outcome of this complete package is described in the report,