Variable displacement is an automobile engine technology that allows the engine displacement to change, usually by deactivating cylinders, for improved fuel economy. The technology is primarily used in large multi-cylinder engines. Many automobile manufacturers have adopted this technology as of 2005, although the concept has existed for some time prior to this.

Cylinder deactivation is used to reduce the fuel consumption and emissions of an internal combustion engine during light-load operation. In typical light-load driving the driver uses only around 30 percent of an engine’s maximum power. In these conditions, the throttle valve is nearly closed, and the engine needs to work to draw air. This causes an inefficiency known as pumping loss. Some large capacity engines need to be throttled so much at light load that the cylinder pressure at top dead centre is approximately half that of a small 4-cylinder engine. Low cylinder pressure results in lower fuel efficiency. The use of cylinder deactivation at light load means there are fewer cylinders drawing air from the intake manifold, which works to increase its fluid (air) pressure. Operation without variable displacement is wasteful because fuel is continuously pumped into each cylinder and combusted even though maximum performance is not required. By shutting down half of an engine's cylinders, the amount of fuel being consumed is much less. Between reducing the pumping losses, which increases pressure in each operating cylinder, and decreasing the amount of fuel being pumped into the cylinders, fuel consumption can be reduced by 8 to 25 percent in highway conditions.

Cylinder deactivation is achieved by keeping the intake and exhaust valves closed for a particular cylinder. By keeping the intake and exhaust valves closed, it creates an "air spring" in the combustion chamber – the trapped exhaust gases (kept from the previous charge burn) are compressed during the piston’s upstroke and push down on the piston during its downstroke. The compression and decompression of the trapped exhaust gases have an equalising effect – overall, there is virtually no extra load on the engine. In the latest breed of cylinder deactivation systems, the engine management system is also used to cut fuel delivery to the disabled cylinders. The transition between normal engine operation and cylinder deactivation is also smoothed, using changes in ignition timing, cam timing and throttle position (due to electronic throttle control). In most instances, cylinder deactivation is applied to relatively large displacement engines that are particularly inefficient at light load. In the case of a V12, up to 6 cylinders can be disabled.

Two issues to overcome with all variable-displacement engines are unbalanced cooling and vibration.^{[citation needed]}

The oldest engine technological predecessor for the variable-displacement engine is the hit and miss engine, developed in the late 19th century. These single-cylinder stationary engines had a centrifugal governor that cut the cylinder out of operation so long as the engine was operating above a set speed, typically by holding the exhaust valve open.

First experiments with multiple-cylinder engines during WWII, were re-attempted in 1981 on Cadillac's ill-fated L62 "V8-6-4" engine. The technology was made a standard feature on all Cadillac models except Seville, which had the 350 diesel V-8 engine as a base engine. Cadillac, in conjunction with Eaton Corporation, developed the innovative V-8-6-4 system which used the industry's first engine control unit to switch the engine from 8- to 6- to 4-cylinder operation depending on the amount of power needed. The original multi-displacement system turned off opposite pairs of cylinders, allowing the engine to have three different configurations and displacements. The cars had an elaborate diagnostics procedure, including showing engine trouble codes on the air conditioning display. However, the system was troublesome, misunderstood by customers, and a rash of unpredictable failures led to the technology being quickly retired.

In 1981 Alfa Romeo developed in collaboration with the University of Genoa a semi-experimental variable displacement engine version of the Alfa Romeo Alfetta, called Alfetta CEM (Controllo Elettronico del Motore, or Electronic Engine Management), and showed it at the Frankfurt Motor Show. The 130 PS (96 kW; 128 bhp) 2.0-litre modular engine featured fuel injection and ignition systems governed by an engine control unit, which could shut off two of four cylinders as needed in order to reduce fuel consumption. An initial batch of 10 examples were assigned to taxi drivers in Milan, to verify operation and performance in real-world situations. According to Alfa Romeo during these tests cylinder deactivation was found to reduce fuel consumption by 12% in comparison to a CEM fuel-injected engine without variable displacement, and almost by 25% in comparison to the regular production carburetted 2.0-litre. After the first trial, in 1983 a small series of 1000 examples was put on sale, offered to selected clients; 991 examples were produced. Despite this second experimental phase, the project had no further developments.

In 1982 Mitsubishi developed its own variable displacement in the form of MD (Modulated Displacement) which proved that the technology, first used in Mitsubishi's 1.4 L 4G12 straight-four engine, can function successfully. Because Cadillac's system proved to be a failure and a four-cylinder engine was used, Mitsubishi hailed their own as a world first. The technology was later used in Mitsubishi's V6 engines.