Hydrogen can be readily used in spark ignition engines as a clean alternative to fossil fuels. However the higher burning velocity and shorter quenching distance of hydrogen compared with hydrocarbons cause a larger heat transfer from the burning gas to the combustion chamber walls. Because of this cooling loss, the thermal efficiency of hydrogen-fueled engines is sometimes lower than that of conventionally fueled engines. Therefore, reducing the cooling loss is a crucial element in improving the thermal efficiency of hydrogen combustion engines. Previous research by the author and others has proposed the direct injection stratified charge as a technique for reducing the cooling loss in hydrogen combustion and shown its effect in reducing cooling loss through experiments in a constant volume combustion vessel. However, it is known that a reduction in cooling loss does not always improve thermal efficiency due to a simultaneous increase in the exhaust heat loss. This paper explains the relation between cooling loss reduction and thermal efficiency improvements by the direct injection stratified charge in hydrogen combustion engines.