A new diesel combustion concept termed MULDIC (MULtiple stage DIesel Cobustion), which can reduce NOx emissions at high load conditions, was studied by means of engine test, combustion observation and numerical simulation. The engine test showed that simultaneous reduction of NOx and smoke could be obtained with MULDIC operation. In-cylinder combustion observation was carried out in order to clarify the cause of the smoke reduction of the MULDIC. In these photographs, a first stage combustion was observed with nonluminous flame. In a second stage comustion, a highly sooting luminous flame was observed because the ignition delay was short. However this luminous flame disappeared quickly. Computational results showed that, oxygen is distributed evenly in the cylinder in later portion of the second stage combustion. Moreover, since cylinder temperature was very high, most of the soot oxidized rapidly. Thus, low smoke combustion was obtained.