A comprehensive two-dimensional multi-zone model of a diesel engine cycle is presented in this study, in order to examine the influence of insulating the combustion chamber on the performance and exhaust pollutants emissions of a naturally-aspirated, direct injection (DI), four-stroke, water-cooled diesel engine. The heat insulation is taken into account by the corresponding rise of wall temperature, since this is the final result of insulation useful for the study. It is found that there is no remarkable improvement of engine efficiency, since the decrease of volumetric efficiency has a greater influence on it than the decrease of heat loss to the coolant, which is converted mainly to exhaust gas enthalpy (significant rise of the exhaust gas temperature). As far as the concentration of exhaust pollutant emissions is concerned, it is found that the rising heat insulation leads to a significant increase of the exhaust nitric oxide (NO) and to a moderate increase of the exhaust soot concentration. Plots of temperature, equivalence ratio, NO and soot distributions at various instants of time inside the combustion chamber, emanating from the application of the multi-zone model, aid the correct interpretation of the insulation effects gaining insight into the underlying mechanisms involved.