The Opposed Piston Two-Stroke (OPTS) engine has several advantages for power density, fuel tolerance, fuel efficiency and package space. A new type of balanced opposed-piston folded-crank train two-stroke engine for Unmanned Aerial Vehicle (UAV) was studied in this paper. The effects of high altitude environment on engine performance and emissions are investigated by thermodynamic simulation. Moreover, the matching between the engine and turbocharger was designed and optimized for different altitude levels. The results indicate that a suitable turbocharger for OPTS engine can achieve the purpose of improving the quality of scavenging, lowering the fuel consumption and recovering power at high altitude environment. Finally, an optimized OPTS engine model especially for UAV is proposed in this research.