A new speed reducer with the planocentric involute gearing mechanism, which can be replaced with a cycloid drive, is developed. This speed reducer eliminates some significant disadvantages of the cycloid drive, which are difficulty in not only designing and manufacturing the tooth profile but also meshing the gears to maintain an accurate center distance. In this paper, to avoid tooth tip interference between internal and external gears and maximize a speed reduction ratio, a pressure angle, a tooth height, a profile shifting factor and the number of teeth are simulated. We manufacture a prototype based on these simulated results of the design specifications (the rated power of 350watts, rated speed of 3600rpm and speed reduction ratio of 41:1), of which the overall size is ${Phi}146mm{ imes}95.2mm$. A power efficiency test of the prototype is carried out to compare with the cycloid drive.