The use of compressed natural gas (CNG)-fuelled lean-burn city bus engines has a significant potential for air quality improvement in urban areas. Particularly important is the reduction of NO, as well as particulate and non regulated HC-emissions. For this reason, a CNG-fuelled, lean-burn, turbocharged, intercooled engine equipped with catalytic converter was developed. The basic engine is a 6-cylinder, heavy duty, serial production Hungarian diesel engine which complies with Euro-2 emissions limits. The objective of this development was to meet European emission limits forecast for the year 2005 (NO., < 3.0 g/kWh, CO and HC < 0.6 g/kWh). Furthermore, it was necessary to fulfil the heavy-duty requirements regarding performance behaviour, driveability and reliability. To achieve these requirements, a careful optimisation of the main control parameters was carried out. On the basis of test bench results, low emissions and favourable fuel consumption capability of the engine are reported. Based on the evaluation of economical feasibility, the costs of CNG bus operation is additionally discussed. It can be concluded that CNG city bus operation is - compared to diesel operation - a promising way to improve economically the local air quality.