A new dual fuel Controlled Auto-Ignition (CAI) combustion concept was proposed and researched for lower exhaust emissions and better fuel economy. The concept takes the advantage of the complementary physical and chemical properties of high octane number gasoline and high cetane number Di-Methyl Ether (DME) to organize the combustion process. Homogeneous gasoline/air mixture is utilized as the main combustible charge, which is realised by a low-cost Port Fuel Injection (PFI) system. Pressurised DME is directly injected into cylinder via a commercial Gasoline Direct Injection (GDI) injector. Flexible DME injection strategies are employed to realise the controlled auto ignition of the premixed charge. The engine is operated at Wide Open Throttle (WOT) in the entire operating region in order to minimize the intake pumping loss. Engine load is controlled by varing the amount of internal Exhaust Gas Recirculation (iEGR) which is achieved and adjusted by Positive Valve Overlap (PVO) and/or exhaust back pressure, and exhaust rebreathing method. The premixed mixture can be of either stoichiometric air/fuel ratio or fuel lean mixture and is heated and diluted by recycled exhaust gases. The use of internal EGR is considered as a very effective method to initiate CAI combustion due to its heating effect and moderation of the heat release rate by its dilution effect. In addition, the new combustion concept is compared to conventional SI combustion. The results indicate that the new combustion concept has potential for high efficiency, low emissions, enlargement of the engine operational region and flexible control of CAI combustion.