In this work an Engine Management System (EMS) using a low cost 8-bit microcontroller specifically for the cost sensitive small two-wheeler application was designed and developed. Only the Throttle Position Sensor (TPS) and the cam position sensor (also used for speed measurement) were used. A small capacity 125CC four stroke two-wheeler was converted into a Port Fuel Injected (PFI) engine and was coupled to a fully instrumented Eddy Current Dynamometer. Air-fuel ratio was controlled using the open loop, lookup-table [speed (N) and throttle (α)] based technique. Spark Time was controlled using a proportional / fuzzy logic based close loop control algorithm for the idle speed control to reduce fuel consumption and emissions. Test results show a significant improvement in engine performance over the original carbureted engine, in terms of fuel consumption, emissions and idle speed fluctuations. The Proportional controller resulted in significantly lower speed fluctuations and HC / CO emissions than the fuzzy logic controller. Though the fuzzy logic controller resulted in low cycle by cycle variations than the original carbureted engine, it leads to significantly higher HC levels. The performance fuzzy logic can be improved by modifying the membership function shapes with more engine test data. Copyright © 2007 by ASME.