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In a conventional internal combustion engine, approximately 60 % of total heat energy is lost with exhaust gases and cooling systems. In this study, the effect of insulated heat transfer surfaces inside the combustion chamber of a diesel engine was investigated. Thermal barrier Zirconium coatings are used in diesel engine piston, valves and heads. An experimental investigation into the effect of coatings on the performance of a Diesel engine was conducted. Tests were performed on a single cylinder diesel engine with eddy current dynamometer whose piston and head were coated with 0.35 mm thickness CaZrO3. The coating is evaluated for its ability to improve the combustion characteristics. The coated engine was tested at the same operating condition as that of standard engine (without coating). The results indicate an improvement in the Brake thermal efficiency with a consequent reduction in the brake specific fuel consumption.