The Divided Exhaust Period (DEP) concept is an approach which has been proved to significantly reduce the averaged back pressure of turbocharged engines whilst still improving its combustion phasing. The standard layout of the DEP system comprises of two separately-functioned exhaust valves with one valve feeding the blow-down pulse to the turbine whilst the other valve targeting the scavenging behaviour by bypassing the turbine. Via combining the characteristics of both turbocharged engines and naturally aspirated engines, this method can provide large BSFC improvement.The DEP concept has only been applied to single-stage turbocharged engines so far. However, it in its basic form is in no way restricted to a single-stage system. This paper, for the first time, will apply DEP concept to a regulated two-stage (R2S) downsized SI engine. By controlling the timing of the exhaust valves separately to feed the exhaust mass flow to the high-pressure turbine or the low-pressure turbine or the exhaust pipe, it is anticipated that such system could achieve even better breathing characteristics than the standard one-stage turbocharged engine.The simulation was carried out on a heavily downsized R2S turbocharged SI engine model. As the major objective of this project is to explore the gas exchange process for the DEP-based R2S downsized engine, the knock model in the system is ignored. The results showed that PMEP is significantly improved over the entire engine speed and BSFC was decreased by up to 3% with minimum modification of the original system. The system also showed the potential benefit for knock sensitivity and it is considered that by adding the knock model, there will be some more BSFC improvement.