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This paper describes a study of the effects of two cycle engine oil composition on biodegradability and engine performance. With increasing interest in environmental protection, it becomes important to develop an oil that would not harm the environment. Desirable requirement was the development of a biodegradable oil with performance suitable for outboard engines, motorcycles, chain saws, and all other types of two-cycle engines. In addition to biodegradability, two key points for the development of this oil were the selection of a base oil that provided outstanding thermal stability and the blending of ashless dispersants that offered excellent high-temperature cleanliness. The developed oil which is formulated with properly selected esters and dispersants showed better performance than current biodegradable oils in every practical use.