This study is on the development of 150PS inboard type of compact water jet propulsion system. The water jet is composed of intake, impeller, diffuser, reverse bucket and main shaft. Components of water jet have been manufactured through precision processing after sand casting. Development of water jet propelled engine has been finally completed by processes which are design, production and inspection on each component. The water jet performance characteristics show that 0.29 m3/s of maximum flow rate and 37 m/s of flow velocity have been secured in the ground test pool. Field test was performed by 21ft test ship that water jet propulsion equipment developed in this study was installed. As a result, the weight of hull, engine and other parts of the ship has been almost 1.2 ton and 45 km/h of maximum sailing speed has been recorded with 3700 rpm of engine in the domestic coast test.