A multi phase program was undertaken with the stated goal of using advanced design and development tools to create a unique combination of existing technologies to create a powertrain system specification that allowed minimal increase of volumetric fuel consumption when operating on E85 relative to gasoline. Although on an energy basis gasoline / ethanol blends typically return similar fuel economy to straight gasoline, because of its lower energy density (gasoline ~ 31.8MJ/l and ethanol ~ 21.1MJ/l) the volume based fuel economy of gasoline / ethanol blends are typically considerably worse. This project was able to define an initial engine specification envelope, develop specific hardware for the application, and test that hardware in both single and multi-cylinder test engines to verify the ability of the specified powertrain to deliver reduced E85 fuel consumption. Finally, the results from the engine testing were used in a vehicle drive cycle analysis tool to define a final vehicle level fuel economy result. During the course of the project, it was identified that the technologies utilized to improve fuel economy on E85 also enabled improved fuel economy when operating on gasoline. However, the E85 fueled powertrain provided improved vehicle performance when compared to the gasoline fueled powertrain due to the improved high load performance of the E85 fuel. Relative to the baseline comparator engine and considering current market fuels, the volumetric fuel consumption penalty when running on E85 with the fully optimized project powertrain specification was reduced significantly. This result shows that alternative fuels can be utilized in high percentages while maintaining or improving vehicle performance and with minimal or positive impact on total cost of ownership to the end consumer. The justification for this project was two-fold. In order to reduce the US dependence on crude oil, much of which is imported, the US Environmental Protection Agency (EPA) developed the Renewable Fuels Standard (RFS) under the Energy Policy Act of 2005. The RFS specifies targets for the amount of renewable fuel to be blended into petroleum based transportation fuels. The goal is to blend 36 billion gallons of renewable fuels into transportation fuels by 2022 (9 billion gallons were blended in 2008). The RFS also requires that the renewable fuels emit fewer greenhouse gasses than the petroleum fuels replaced. Thus the goal of the EPA is to have a more fuel efficient national fleet, less dependent on petroleum based fuels. The limit to the implementation of certain technologies employed was the requirement to run the developed powertrain on gasoline with minimal performance degradation. The addition of ethanol to gasoline fuels improves the fuels octane rating and increases the fuels evaporative cooling. Both of these fuel property enhancements make gasoline / ethanol blends more suitable than straight gasoline for use in downsized engines or engines with increased compression ratio. The use of engine downsizing and high compression ratios as well as direct injection (DI), dual independent cam phasing, external EGR, and downspeeding were fundamental to the fuel economy improvements targeted in this project. The developed powertrain specification utilized the MAHLE DI3 gasoline downsizing research engine. It was a turbocharged, intercooled, DI engine with dual independent cam phasing utilizing a compression ratio of 11.25 : 1 and a 15% reduction in final drive ratio. When compared to a gasoline fuelled 2.2L Ecotec engine in a Chevrolet HHR, vehicle drive cycle predictions indicate that the optimized powertrain operating on E85 would result in a reduced volume based drive cycle fuel economy penalty of 6% compared to an approximately 30% penalty for current technology engines.