In this paper, a new-type balanced opposed-piston folded-cranktrain (OPFC) two-stroke diesel engine is developed by Beijing Institute of Technology. OPFC has some potential advantages such as simple structure, good balance, compact, high power density and thermal efficiency. The structural feature of OPFC engine leads to the performance is different with the conventional engine. In order to study and verify the characteristics of this kind of engine, the folded-crank train dynamics, cylinders scavenging process and combustion process are investigated. The influence of parameters on the engine performance is investigated, includes the fuel injection timing, intake/exhaust port timing. In addition, the nozzle diameter is investigated as a main factor to affect the mixture and combustion process in the cylinder.