•Direct injection stratified lean burn combustion using hydrous ethanol as fuel.•A single cylinder optical research engine was instrumented and used in this research.•Significant reduction of engine-out emissions and fuel consumption was achieved due to the use of lean mixtures.•Combustion analysis considering cyclic variability and combustion duration related to engine fuel conversion efficiency.•Important results and technology for the Latin America market application. Fulfilling emission restrictions is the most challenging task considering future engine development. Stratified lean burn combustion mode associated with the use of biofuels has been widely studied to overcome current and future environmental regulation and global weather concerns. Power modulation by means of a throttle valve increases the pumping mean effective pressure with a corresponding penalty in engine fuel consumption at part load. De-throttling by means of direct injection (DI) is an attractive way of improving fuel economy and exhaust emissions at low and part load operation in spark-ignition (SI) engines. In this research, a study has been made of the investigations concerning stratified lean burn combustion in a wall-air guided type SI single cylinder optical research engine (SCORE) using Brazilian hydrous ethanol (E100) as fuel. Experiments were conducted at a constant load of 3 bar of net indicated mean effective pressure (NIMEP), for a wide range of injection, ignition and mixture formation parameters. Engine fuel conversion efficiency, combustion characteristics and emissions were evaluated for each excess air ratio (λ). Optical visualization illustrated the spray behavior and flame propagation. Specific fuel consumption and engine fuel conversion efficiency achieved an improvement of 8.1% and 2.6%, respectively, for λ = 1.4. Engine-out specific emissions were reduced by 66% for nitrogen oxides (NOx) and by 20% for total hydrocarbon (THC) and carbon dioxide (CO). A detailed combustion analysis based on in-cylinder pressure measurement was carried out and provided useful data for ethanol direct injection engine development.