The piston dynamic model and multidimensional combustion model were established based on a freepiston diesel engine. The characteristic of incylinder low heat rejection was realized by changing the parameters of heat transfer model and the piston motion was optimized to further investigate the combustion characteristics of the original engine, low heat radiation FPE and the one after optimization. The results indicated that the incylinder temperature and pressure of FPE were higher than those of original engine after combustion and those of optimized FPE were much higher with the 162.77 K and 1.53 MPa increase of their respective peak value. The peak heat release rates of FPE under three conditions increased in turn and the corresponding crank angles advanced gradually. Compared with the original engine, low heat radiation FPE had a short ignition delay and rapid combustion period, but a much longer mixingcontrolled combustion stage and late combustion phase. The characteristics of optimized low heat radiation FPE were just the opposite of low heat FPE, which was close to the ideal heat release rule. The indicated thermal efficiency of three mentioned engines was 45.8%, 48.4% and 51.5% respectively. Accordingly, the thermal efficiency of FPE could be further improved by adopting low heat radiation and optimizing piston motion.