Diesel engine generator (DG) sets used in industrial plants and residential/official buildings cause serious noise problems if not (canopised) properly. Generally, DG set engines used are with rotational speed of 1500 rpm. In present study automotive diesel engine with 3000 rpm speed was converted for Genset application. Due to higher speed, engine noise levels and its cooling requirements were quite high. Objective of the study was to optimize the design of an enclosure for the said DG set to meet requirements of low noise and proper ventilation to comply MoEF legislative limits.A detailed Noise Source Identification (NSI) was carried out to identify and rank different noise sources. A Hybrid approach which consists of experimental DOE and simulation based on Boundary Element Method (BEM) was used for enclosure design. Design variables like enclosure dimensions, sound absorbing materials and louvers were used in optimization study. Final validation was done on modified enclosure prototype for noise level and internal temperature. Substantial noise level reduction of 8 dB was achieved with appropriate ventilation.