Heat engines are most widely used machines for transportation and producing energy. Almost 80% of the energy in the world is obtained from fossil fuels. During the last decade, efficient use of energy became very important and many rules are introduced to achieve energy efficiency. Therefore the efficiency of heat engines such as internal combustion engines should be paid more attention. Recently, heat engine cycles such as diesel cycle have been combined with other cycles for increasing the efficiency of internal combustion engines. In this paper, a thermodynamic performance analysis and optimization of an over-expanded Diesel cycle is studied. These studies based on cycle parameters. Also, an optimization function which is based on power and compression ratio is defined which haven’t been studied yet. Even more, a new parameter which is called over-expansion ratio is defined and included in the optimization function. The influence of over-expansion ratio to power output and thermal efficiency are inspected for different compression ratios, the maximum temperature ratios, and the cut-off ratios. One of the most important outputs of the study is that the theoretical maximum efficiency can be increased to 70%.