In order to improve the thermal efficiency of internal combustion engines, reducing various losses such as cooling loss, exhaust loss, pumping loss, and friction loss is important. The purpose of this study is to reduce cooling loss from the combustion gas in the engine cylinder to the piston wall surface, to reduce cooling loss, which accounts for a larger proportion than other losses. Conventional research has attempted a method of replacing the piston base metal with ceramics to reduce cooling loss. However, since ceramics have a large heat capacity, therefore leads to raising the wall surface temperature of the ceramics piston and decreasing engine volumetric efficiency. As a result, smoke emissions increase. This study aims to develop and research technology that reduces cooling loss without increasing smoke emissions by applying partial insulation on the combustion chamber wall surface. Cooling loss and engine volumetric efficiency in engine cylinders were analyzed by simulation to find suitable insulation material and identify the areas to insulate. The results of that analysis indicated that zirconia coating on high heat flux areas of the combustion chamber surface was effective at reducing cooling loss while keeping the same engine volumetric efficiency. Based on the simulation results, insulated pistons prototypes were made to perform experiments. The experiments were conducted with an in-line 4-cylinder 4-liter diesel engine. Three kinds of pistons were examined: a standard piston (no insulation), a partially insulated piston and a fully insulated piston. The fully insulated piston exhibited the most effective cooling loss reduction and indicated thermal efficiency increase performance, but smoke emissions increased. In contrast, the experimental results showed that the partially insulated piston had a smaller cooling loss reduction and indicated thermal efficiency increase, but no smoke emissions increase thanks to keeping the same engine volume efficiency. These results indicated partially insulated piston is useful as a technology for reducing cooling loss of internal combustion engine.