Though, as a renewable energy resource, alcohol fuel has many advantages in China, it is difficult for diesel engines to operate on alcohol due to its low cetane number and high latent heat of vaporization. This paper proposes an approach to its ignition problem by combining internal exhaust gas recirculation (EGR) with injection of small diesel fuel. Based on this approach, a two-stroke single-cylinder diesel engine was developed. Preliminary studies demonstrated that the engine can run on alcohol with almost zero level of smoke and low exhaust gas temperature, and that the engine operating on alcohol has lower nitrogen oxide (NO.) emissions and 2-3% higher effective thermal efficiency than that operating on diesel fuel in moderate and high load zones. (c) 2005 Elsevier Ltd. All rights reserved.