In recent years, fossil fuels such as petroleum, coal, and natural gas have become limited resources. In addition, bad effects caused by excessive carbon dioxide (CO 2) emissions have now begun destroying our global environment seriously. Since current living and economical standards depend strongly on the fossil fuels, it is necessary to realize a new society that utilizes biomass as one of major sources of energy. In this background, we manufactured a practical Stirling engine using woody biomass fuels for the first time in Japan in 2005. Further we proposed a unique co-generation system with the Stirling engine that uses woody biomass fuels such as sawdust, firewood, and wood pellets. In this co-generation system, 43% of the input energy is wasted as heat loss from the exhaust smoke into the atmosphere. Therefore we tried to recover the waste heat by using a thermoelectric conversion module in this study. In this report, the results of basic performance test and demonstration experiment as a co-generation system combined the waste heat recovery with a power generating system are reported.