The authors have been developing a ceramic heat insulated natural gas engine, in which cooling losses are greatly reduced by using heat insulation structure on the combustion chamber walls. High thermal efficiency is achieved by being able to operate this engine at high compression ratios. This engine is intended to use in co-generation systems and hybrid vehicles. In the engine, a new combustion system has been developed to enable the use of compressed natural gas (CNG) as fuel supplied at low pressure. The system consists of a pre-chamber and a throat valve on the passage between the pre- and main- chambers in order to make the engine ignite smoothly. This system uses low-pressure fuel, injected into the pre-chamber when the throat valve is closed. A homogeneous charge and large amounts of EGR are used in the main chamber. Compression ignition takes place in the pre-chamber when the throat valve is opened, near the end of the compression stroke, followed by combustion in the main chamber. In this study, the effects of fuel fraction injected in the pre-chamber and main chamber, as well as the amount of EGR, were evaluated. This paper gives a description of the baseline engine, development of the new combustion system and the test results.