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Diesel railcars in Japan have played a major role in transportation over mountain lines with steep gradients. However, the efficiency of conventional transmissions is low and the speed of the cars when negotiating gradients is slow being in a range of approximately 40km/h as current transmissions operate in hydraulic torque converter phase. The authors have developed a new transmission provided with two direct stages of jaw clutch drive and have tested it at Railway Technical Research Institute, the Japan Railways Group (referred to as RTRI, JR). Following a satisfactory test, two improved transmission units were built on the basis of the results. The transmissions were installed in a standard JR diesel railcar and tested on a JR mainline in the mountain zone. The test results showed that the performance of the diesel railcar was greatly improved thanks to the new transmissions.