This paper involves increase in engine power by increasing bore size and stroke length along with other required engine level design modifications. Main focus is on addressing the cooling related issues by optimizing the cooling jacket design and water pump flow parameters. Engine cooling requirements need to be upgraded to address increase in thermal loads because of reduction in cooling area between cylinder block and cylinder liner due to increase in bore size keeping engine block size fixed. Methodology used is cooling jacket optimization and water pump design modifications.In internal combustion engines, cooling system involves a complex geometry of water jackets. For such complex systems, CFD simulations can be executed in a short period of time and are relatively inexpensive. CFD provides the ability to theoretically simulate any physical condition. Effective utilization of STAR CCM+ V8.04 is done for water jacket design of a 3 cylinder water cooled inline diesel engine. k-ε turbulence model was used for the present study. Coolant flow velocity and temperature distribution was used for study. Cylinder block and cylinder head were modeled in UG NX 7.5.