Direct-injection spark-ignition (DISI) engines have been investigated for many years but only recently have shown promise as a next generation gasoline engine technology. Much of this new enthusiasm is due to advances in the fuel injection system, which is now capable of producing a well-controlled spray with small droplets. A physical understanding of new combustion systems utilizing this technology is just beginning to occur. This analytical and experimental investigation with a research single-cylinder combustion system shows the benefits of in-cylinder gasoline injection versus injection of fuel into the intake port. Charge cooling with direct injection is shown to improve volumetric efficiency and reduce the mixture temperature at the time of ignition allowing operation with a higher compression ratio which improves the thermodynamic cycle efficiency. Volumetric efficiency improved by 2-3%, wide-open-throttle (WOT) output improved by 5-10% and part-load fuel consumption improved by 4-5% versus a production PI engine with stoichiometric calibration. A further gain of 6-7% was recorded with lean, homogeneous air-fuel operation.