A high performance model Stirling engine, in which the heater, regenerator and cooler as a whole is formed by hundreds of porous metal sheets, is identified for theoretical analysis to facilitate the future scale-up design. The reciprocating flow and heat transfer both in the heat exchanger and in the full engine is simulated by a dynamic mesh Computational Fluid Dynamics (CFD) method, and is validated by analytical solutions and experimental data. An optimization method is also developed to incorporate the entropy generation caused by flow friction and irreversible heat transfer. The results show that relatively high indicated power of 33.4 W is obtained, corresponding to a specific power of 1.88 W/cm(3) and a thermal efficiency of 43.9%, which are attributable to the extremely small flow friction loss and excellent heat transfer characteristics in the regular shaped microchannels, as well as to the compact heat exchanger design that significantly reduces the dead volume. Given the same operating conditions, the optimized porous-sheets regenerator has a significantly lower total loss of available work while maintaining even higher thermal effectiveness in comparison with the optimized conventional wire mesh regenerator. (C) 2013 Elsevier Ltd. All rights reserved.