Reducing the pumping loss, and thus, the fuel consumption of gasoline engine at part load, a two-stage intake valve lift system was implanted into a PFI engine. A corresponding engine model was set up with GT-power as well, which can simulate the effect of two-stage intake valve lift and different EGR rates on fuel economy performance and on combustion condition of a gasoline engine. Based on simulation results, the valve lift control strategy and EGR control strategy was studied in this paper. Results showed that at low engine speed, when SMALL LIFT was used, the tumble flow and the combustion process in cylinder was improved and burn time duration became shorter, resulting in higher indicated efficiency and lower fuel consumption than by LARGE LIFT. With the introduction of the exhaust gas recirculation (EGR), lower fuel consumption was acquired. With the increase of EGR rate, the knock tendency and cylinder peak pressure were decreased and the combustion phase was retarded, resulting in increase of fuel consumption.