In a conventional internal combustion engine, approximately one-third of total fuel input energy is converted to useful work. Since the working gas in a practical engine cycle is not exhausted at ambient temperature, a major part of the energy is lost with the exhaust gases. A new trend in the field of internal combustion engines is to insulate the heat transfer surfaces. In this study, the effect of insulated heat transfer surfaces on direct injected and turbocharged diesel engine fuel consumption and cooling system were investigated. The results indicate a reduction in fuel consumption and heat losses to engine cooling system of the ceramic coated engine.