Abstract: An underwater exhaust system which acts to increase the speed of a boat, to reduce fuel consumption, to improve handling and to reduce the skin friction of the water in high seas. The exhaust system basically comprises an exhaust box built into the hull over the bottom of the boat and a diffuser positioned between the exhaust box and the boat bottom. The engine exhaust is directed through the exhaust box and out the exhaust holes of the diffuser into the water. A pump is used to pump seawater into the exhaust box for cooling of the exhaust. Also, there is a step in the hull. The step is positioned approximately 25% from the transom of the stern. The combination of the step and the directing of the exhaust under the hull enhances the speed of the boat and its handling.