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With steep increase in fuel prices, there is a strong need for development of better engines with improved performance and emissions. This needs a dedicated effort on engine hardware optimization for lower CO2 levels. Exhaust muffler design is trade-off between noise, backpressure and size/weight. With increase in exhaust muffler volume and simplification of structure there is a corresponding drop observed in exhaust pressures. Study of such a phenomenon would give an insight to benefits achieved based on changes in muffler volumes/structure. This in a way leads to engine improvement. In this paper it has been shown how exhaust muffler characteristics (size and internal construction) impacts engine performance.