A system and method for detecting an operating mode of an engine or engine component modulate a first engine parameter and analyze a change in a second engine parameter in response to modulating the first engine parameter to detect a current operating mode based on changes in at least one of the first and second engine parameters. In a variable compression ratio (VCR) engine embodiment, the system and method modify ignition timing of at least one cylinder until engine knock is detected and determine whether the cylinder is operating in the lower compression ratio mode or the higher compression ratio mode by comparing the ignition timing change required to cause engine knock to a corresponding threshold.