A novel design of an air-gap insulated piston has been proposed which is expected to give a longer life compared to the existing designs. The new composite piston is made of a crown piece which is fitted to the base of a piston through a gasket by an interference fitting and locked by oval shaped rivets radially. A steady state two dimensional thermal analysis is performed on the piston to predict the temperature distribution, then a thermo-elastic analysis is performed to obtain thermal stress distribution. Further, a pure mechanical stress analysis is performed on the piston. These analyses are performed on a Aluminum single piece piston, as reference and an air-gap insulated Ultra High Strength Steel piston using finite element method. Constant temperatures are assumed at gas, liner and oil boundaries of the piston. Also, film coefficients on the piston boundaries are kept constant. The analysis gives a detailed study on the temperature distribution in the piston and heat flux through different surfaces of the piston. Also, piston skirt deflection and stress around the air-gap area are obtained from the same analysis. In the steel piston, the crown temperature is increased by 59% and the heat loss through the crown is reduced by 24.4%, compared to the Aluminum piston. The maximum skirt deflection for the Steel piston is on the top about 0.39 mm. The weakest section is the top curve (D location, Fig.6) of the air-gap.