Toyota Motor Corp. said today the engine will be rolled out in 14 models this year and next year.
The technology is common in hybrids, such as the Toyota Prius and Ford Fusion, which switch back and forth between an electric motor and a gas engine for better mileage. But it is relatively rare in vehicles with gas engines alone. Japanese rivals Mazda Motor Corp. and Honda Motor Co. have developed similar engines.
Toyota said the new engine will deliver 10 per cent better fuel efficiency than comparable current engines.
It uses an old-style engine type called the Atkinson cycle, which reduces heat through greater thermal efficiency. Toyota said it developed a version that achieves efficiency without sacrificing power.
Toyota also used other features such as better combustion and reduced friction to boost efficiency.
The new engine will come in 1.0 liter and 1.3 liter versions, but will be expanded to other types, and variations of it will also be used in future hybrid models, according to Toyota.
"They show the future direction of Toyota engine development," said Toyota spokesman Brian Lyons.
Toyota has been worried about the reliability of the oil supply for decades and has focused on green cars, especially hybrids.
The maker of the Lexus luxury model and Camry sedan has sold more than 6 million hybrid vehicles around the world, more than any other manufacturer, since the Prius was introduced in late 1997.
Hybrids are popular but remain a niche market, and competition has been intensifying from efficient gas engines.