A watercraft having a water propulsion unit driven by an impeller shaft which is powered by a four-cycle internal combustion engine is disclosed. The engine has a crankshaft which drives, via a transmission, the impeller shaft. The transmission is arranged so that the crankshaft of the engine does not contact lubricant in a lubricant reservoir of a lubricating system of the engine. In a first arrangement, the four-cycle engine includes an oil reservoir positioned at a lower portion of the engine. In this arrangement, a crankshaft of the engine extends along an axis above an axis along which the impeller shaft rotates, where the crankshaft and impeller shaft are in driving relation via a gear-type transmission. In a second arrangement, the engine is provided with a dry-sump type lubricating system with an oil reservoir positioned remote of the bottom of the engine, such as on the hull. In this arrangement, the engine is positioned adjacent the bottom of the watercraft, and the crankshaft extends in alignment with the impeller shaft.