Abstract: A hydraulic engine which uses liquid fluid as the working medium consists of a housing structure, a liquid fluid inlet passage, a fluid outlet passage, a liquid fluid pump, a fluid actuator, coupling means connecting the two, fluid flow diffusing means, a combustion chamber, an energy exchange zone, a fuel and air supply means, a combustion ignition means, a power takeoff actuator means, a power takeoff means, and a fluid separating means. Liquid fluid enters the engine inlet where it travels to the energy exchange zone. Here exhausted combustion product in the form of a gaseous fluid is introduced into the liquid fluid where it is combined. The mixture is exhausted through the outlet passage of the engine in the form of a liquid fluid-gaseous fluid stream. Upon entering the outlet passage, the mixture is directed to a fluid separating chamber where the working liquid fluid of the engine is separated from the gaseous combustion product.