A hybrid engine that uses a primary internal combustion engine portion and a secondary external combustion engine portion. In a preferred arrangement, the secondary external combustion engine portion operates as a reciprocating steam engine. The heated exhaust gases of the internal combustion engine portion are used to generate steam, and the steam is used to power the steam engine portion adding the steam engine's power output to that of the internal combustion engine. The thermal efficiency of the hybrid engine may be higher than the thermal efficiency of an internal combustion engine without use of the exhaust gas heat. The hybrid engine uses a configuration in which steam is generated directly in the steam engine and a mechanical link between the internal combustion engine portion and the steam engine portion with the result that the hybrid engine is simple and inexpensive to construct and maintain.