To reduce the external volume of Stirling engines and to increase the specific power per unit volume, a novel mechanical arrangement is used where the power cylinder is concentrically situated inside the displacer cylinder. The inner heat transfer surface requirement and the thermodynamic performance characteristics are predicted preparing a nodal analysis in FORTRAN, where the inner volume of the engine is divided into 103 cells. Variation of the temperature in cells is calculated using the first law of thermodynamics, given for unsteady open systems, after arranging the enthalpy inflow and outflow terms. Volumes of cells are calculated using kinematic relations devised for the driving mechanism. The analysis indicates that the heats received from and delivered to the regenerator are not equal to each other. Therefore, the ends of the regenerator should be coupled with a heater and a cooler. The maximum thermal efficiency appears at the minimum mass of working fluid as the minimum thermal efficiency appears at the maximum mass of working fluid. The work increases up to a certain value of working fluid and then decreases. The thermal efficiency increases until a certain value of regenerator area and then decreases as well. Fluid temperature in the hot volume and cooler differs from the wall temperature at significant rates. (c) 2006 Elsevier Ltd. All rights reserved.