Bioethanol can be used as alternative fuel for an internal combustion engine. However, the price of bioethanol per calorific value is generally higher than that of gasoline. Therefore, it is necessary to improve thermal efficiencies of engine using bioethanol and reduce the refining cost of bioethanol. This study aims to improve thermal efficiency in a fuel reforming engine system using low concentration hydrous ethanol (less than 60 wt%). Low concentration hydrous ethanol can reduce the fuel cost because it can be generated from biomass with reduced number of distillation process for refinement. The fuel reforming engine system installs the reformer in the exhaust pipe of an engine, and hydrous ethanol and exhaust heat are supplied to the reformer, which generates the reformed gas containing hydrogen. Part of the hydrous ethanol is supplied to the engine cylinders. This system has three features: (1) exhaust heat recovery by fuel reforming, (2) hydrogen mixed combustion for lean burn, (3) high compression and low temperature combustion using hydrous ethanol with high octane number. This system can be combined these three features. Therefore, this system can the thermal efficiency can be dramatically improved. In this study, thermal efficiency improvements of this system are examined by experimental analysis. As a result, the reformed gas containing hydrogen improves thermal efficiency because the hydrogen in the reformed gas promotes the combustion of low concentration hydrous ethanol. And exhaust heat recovery using fuel reforming improves thermal efficiency. In addition, NO X emissions of this system using low concentration hydrous ethanol were lower than that of using pure ethanol fuel (1150ppm⇒650ppm) because the combustion temperature of hydrous ethanol is lower than that of pure ethanol. Low concentration hydrous ethanol in fuel reforming engine system could achieve high thermal efficiency and low NO X emissions.