A diesel engine body is provided with a geometric compression ratio ε within a range of 12:1 to 15:1. The engine body has an intake valve for opening and closing an intake passage of a cylinder, an exhaust valve for opening and closing an exhaust passage of the cylinder, and an exhaust gas re-circulation passage communicating with the intake and exhaust passages and for partially re-circulating exhaust to the intake passage. During low engine load and rotation speed conditions, the exhaust valve is opened during an intake stroke, and the intake passage is choked. The exhaust valve is closed before the intake valve in the later stage of the intake stroke. An opening area SE of the exhaust valve is set so that a ratio of SE to an opening area SI of the intake valve meets a relation of: 0.01×(15−ε)+0.02≦SE/SI≦0.17