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 exhaust emissions over a wide operating load range, unlike conventional port fuel injection (PFI) engines. Also, turbocharged GDI engines allow engine downsizing with a certain restriction on compression ratio (CR) 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. Therefore, this study is aimed to evaluate the effect of EGR rate on the performance and emission characteristics of a two-liter turbocharged four-stroke GDI engine by computational fluid dynamics (CFD) analysis. For the analysis, the CR of 9.3 and the engine speed of 1000 rev/min., are selected. The engine is operated at full-load conditions in the stoichiometric homogeneous mixture mode. The full cycle CFD simulations are carried out using the CONVERGE. The CFD results are validated by the available experimental data from the literature. The quantity of cooled EGR is varied from 0 to 15% to evaluate its effect on combustion, performance and emission characteristics of the engine. The results showed that the engine indicated mean effective pressure (IMEP) is increased by about 2% and the indicated thermal efficiency is increased by about 2.3% at 5% EGR rate as compared to that of no EGR. It is also found that heat release rate decreased with increase in EGR rate. The mean in-cylinder temperature decreased with increase in the EGR rate reducing NOx emissions.