EGR(exhaust gas recirculation) is considered as a most effective method to reduce the NOx emissions. But high EGR tolerance is always pursued not only for its advantages of the pumping loss reduction and fuel economy benefit in Gasoline-Hybrid engine. However, the occurrence of excessive cyclic variation with high EGR normally prevents substantial fuel economy improvements from being achieved in practice. Therefore, the optimum EGR rate should be carefully determined in order to achieve low fuel consumption and low exhaust emission. In this study, 2 liters gasoline engine with E-EGR system was used to investigate the effects of EGR on fuel efficiency, combustion stability, engine performance and exhaust emissions. With optimal EGR rates, the fuel consumption was improved by 4%. This improvement was achieved while a reduction in NOx emissions of 75% was accomplished. Increase of EGR gas temperature causes the charge air temperature to affect the knock phenomenon and moreover, the EGR valve lift changes for the same control signal.