KSR-III is the first Korean sounding rocket propelled by a liquid propellant propulsion system and it has been developed over 5 years using purely domestic technologies. The propulsion system of KSR-III is a 13-ton class see-level thrust liquid rocket engine(LRE) which utilizes liquid oxygen and kerosene for its propellants and employed pressurized propellant feeding and ablative cooling system. The problem of combustion instabilities which has brought the most difficulty in the development was resolved by implementation of a baffle. Through the development of KSR-III LRE, meaningful achievements have been made in the core technologies of LRE such as design of injectors and combustion chambers and test, evaluation, and control of combustion instabilities. The acquired technologies will be applied to the development of higher performance LREs necessary for future space development programs such as Korean Small Launch Vehicles(KSLV) In this paper, the development of KRE-III LRE system is described including its design, analyses. performance tests and evaluation.