Fuel efficiency and torque performance are two major challenges for highly downsized turbocharged engines. However, the inherent characteristics of the turbocharged SI engine such as negative PMEP, knock sensitivity and poor transient performance significantly limit its maximum potential. Conventional ways of improving the problems above normally concentrate solely on the engine side or turbocharger side leaving the exhaust manifold in between ignored. This paper investigates this neglected area by highlighting a novel means of gas exchange process. Divided Exhaust Period (DEP) is an alternative way of accomplishing the gas exchange process in turbocharged engines. The DEP concept engine features two exhaust valves but with separated function. The blow-down valve acts like a traditional turbocharged exhaust valve to evacuate the first portion of the exhaust gas to the turbine. While the scavenge valve feeding the latter portion of the exhaust gas directly into the low resistant exhaust pipe behaves similarly to valves in a naturally aspirated engine. By combining the characteristics of both turbocharged and naturally aspirated engines, high backpressure between the turbine inlet and the exhaust port is maintained in the blowdown phase while significant reduction of the backpressure could be achieved in the latter displacement phase. This is directly beneficial for pumping work and residual gas scavenging. Combustion phasing & stability and turbocharger efficiency could also benefit from such concept. This simulation study was carried out using a validated 1D model of a highly downsized SI engine. Two degrees of freedom including the lift and the duration of the scavenge valve were optimized to achieve minimum BSFC. The potential for higher attainable BMEP was also briefly investigated at low engine speed. © 2014 SAE International.