The closed cycle diesel system is operated in closed circuit system where there is non air breathing with working fluid consisted of the combination of oxygen, argon and recycled exhaust gas for obtaining underwater or underground power sources. this study has been carried out to analysis the performance of closed cycle system by means of investigation on the combustion characteristics of diesel engine MTU8V183TE52 operating in open, semi-closed, and closed cycle modes. The combustion in closed mode starts a little bit earlier than in open cycle mode. The oxygen concentration and fuel consumption at 240kW closed cycle running are 21∼24% by volume and 77∼79kg/h, respectively. The maximum cylinder pressure and ignition delay time are investigated 110bar and 8.9degree. Also, The combustion simulation program has been studied to predict whether or not combustion. The results from numerical prediction for the basic, cylinder averaged quantities such as the cylinder pressure and the heat release showed excellent with the experimental data.