The Ericsson cycle is named after inventor John Ericsson who designed and built many unique heat engines based on various thermodynamic cycles. He is credited with inventing two unique heat engine cycles and developing practical engines based on these cycles. His first cycle is now known as the closed Brayton cycle, while his second cycle is what is now called the Ericsson cycle. Ericsson is one of the few who built open-cycle engines, but he also built closed-cycle ones.

The following is a list of the four processes that occur between the four stages of the ideal Ericsson cycle:

The ideal Otto and Diesel cycles are not totally reversible because they involve heat transfer through a finite temperature difference during the irreversible isochoric/isobaric heat-addition and isochoric heat-rejection processes. The aforementioned irreversibility renders the thermal efficiency of these cycles less than that of a Carnot engine operating within the same limits of temperature. Another cycle that features isobaric heat-addition and heat-rejection processes is the Ericsson cycle. The Ericsson cycle is an altered version of the Carnot cycle in which the two isentropic processes featured in the Carnot cycle are replaced by two isothermal regeneration processes.

The Ericsson cycle is often compared with the Stirling cycle, since the engine designs based on these respective cycles are both external combustion engines with regenerators. The Ericsson is perhaps most similar to the so-called "double-acting" type of Stirling engine, in which the displacer piston also acts as the power piston. Theoretically, both of these cycles have so called ideal efficiency, which is the highest allowed by the second law of thermodynamics. The most well-known ideal cycle is the Carnot cycle, although a useful Carnot engine is not known to have been invented. The theoretical efficiencies for both, Ericsson and Stirling cycles acting in the same limits are equal to the Carnot Efficiency for same limits.

The first cycle Ericsson developed is now called the "Brayton cycle", commonly applied to gas turbine engines.

The second Ericsson cycle is the cycle most commonly referred to as simply the "Ericsson cycle". The (second) Ericsson cycle is also the limit of an ideal gas-turbine Brayton cycle, operating with multistage intercooled compression, and multistage expansion with reheat and regeneration. Compared to the Brayton cycle which uses adiabatic compression and expansion, the second Ericsson cycle uses isothermal compression and expansion, thus producing more net work per stroke. Also the use of regeneration in the Ericsson cycle increases efficiency by reducing the required heat input. For further comparisons of thermodynamic cycles, see heat engine.

The Ericsson engine is based on the Ericsson cycle, and is known as an "external combustion engine", because it is externally heated. To improve efficiency, the engine has a regenerator or recuperator between the compressor and the expander. The engine can be run open- or closed-cycle. Expansion occurs simultaneously with compression, on opposite sides of the piston.

Ericsson coined the term "regenerator" for his independent invention of the mixed-flow counter-current heat exchanger. However, Rev. Robert Stirling had invented the same device, prior to Ericsson, so the invention is credited to Stirling. Stirling called it an "economiser" or "economizer", because it increased the fuel economy of various types of heat processes. The invention was found to be useful, in many other devices and systems, where it became more widely used, since other types of engines became favored over the Stirling engine. The term "regenerator" is now the name given to the component in the Stirling engine.