A digital CDI(Capacitive Discharge Ignition) system on small two stroke motorcycle engine was developed in this paper, This CDI system with microprocessor as its main part has more flexible spark timing than the conventional CDI system because of its programmable characteristics. The principle of this digital CDI system and the design methods of hardware and software were presented in this paper, Two stroke small engine was tested to investigate the performance of digital CDI system And also this system was investigated to optimize the engine performance. Also comparison between conventional CDI can provide better spark timing variation than the conventional system. The part and full load test results show that the engine power was increased about 10-20% and fuel consumption was decreased about 10-20% simultaneously. Furthermore, this digital CDI system has simple structure, low cost and very little modification are required. It is a promising technology to substitute for the widely used conventional CDI system.