Future stringent emission norms are impelling researchers to look for new emission control techniques. Today, gasoline direct injection (GDI) engines are becoming more popular because of high potential to reduce emissions over a wide operating load range, unlike conventional port fuel injection (PFI) spark ignition (SI) engines. Also, turbocharged GDI engines allow engine downsizing with certain restriction on compression ratio due to knocking tendency, thereby limiting the fuel economy. However, use of exhaust gas recirculation (EGR) delays combustion and lowers the knocking tendency which will aid in improving the fuel economy. The present computational fluid dynamic (CFD) investigation is aimed to evaluate the effect of EGR rate on the performance and emission characteristics of a two-liter turbocharged four stroke GDI engine. The compression ratio of 9.3 and the engine speed of 1000 rev/min., are selected for the analysis. The engine is operated at full-load condition in the homogeneous (stoichiometric) mixture mode. The CFD simulations are carried out using the CONVERGE software, which solves mass, momentum and energy equations with finite volume scheme. PISO algorithm is used to solve pressure-velocity equations. In-cylinder turbulent flow characteristics are analyzed by RNG k- turbulence model, whereas the KH-RT spray break-up model is used to estimate the fuel spray characteristics The combustion is analyzed by detail chemical kinetics using SAGE model and the NOx emission is quantified using Zeldovich model. The closed cycle simulations are executed. The developed CFD code is validated by the available experimental data from the literature. The quantity of cooled EGR is varied from 0 to 15% to evaluate the effect on heat release rate, indicated mean effective pressure, indicated thermal efficiency and NOx emissions of the engine.