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Downsizing is regarded as a promising strategy to reduce the fuel consumption of gasoline engines. But downsized turbocharged engines need to take knocking into account to avoid engine damage. Low Pressure (LP) cooled exhaust gas recirculation (EGR) is an effective suppressant of knocking at boosted high load and EGR could reduce pumping loss at low loads. Both of them are helpful to improve fuel economy. In the research, a LP cooled EGR system is added to a 1.5L turbocharged PFI production gasoline engine and the compression ratio is changed from 9.3 to 11.5. The results show that the fuel reduction is 4.5% at 2000rpm 5bar (20% EGR ratio) and 9.7 % at 3000rpm 10bar (20% EGR ratio) compared with no EGR case. But at boosted high loads the fuel consumption is almost same to the production engine due to high compression ratio which results in severe knocking. In order to further reduce fuel consumption, the engine is operated in lean burn conditions.