In this work we studied the effects of piston bowl design on combustion in a small-bore direct-injection diesel engine. Two bowl designs were compared: a conventional, omega-shaped bowl and a stepped-lip piston bowl. Experiments were carried out in the Sandia single-cylinder optical engine facility, with a medium-load, mild-boosted operating condition featuring a pilot+main injection strategy. CFD simulations were carried out with the FRESCO platform featuring full-geometric body-fitted mesh modeling of the engine and were validated against measured in-cylinder performance as well as soot natural luminosity images. Differences in combustion development were studied using the simulation results, and sensitivities to in-cylinder flow field (swirl ratio) and injection rate parameters were also analyzed. In-cylinder mixture formation analysis showed that ignition of the pilot injection mixture develops nearly as it would in a homogeneous adiabatic reactor, being mostly advected, not mixed, by the bowl’s swirling motion, while its timing is influenced by the local flow field. Details of the local in-cylinder flow are also more crucial than injection parameters in igniting the main injection’s premixed fuel, as it determines the relative overlap with the high-temperature pilot ignited mixture. Bowl geometry effects drive diffusive and late-cycle combustion, as structural differences of the main injection spray flames appear due to the different impact geometries at the piston bowl rim. However, these do not affect wall heat transfer significantly: it is dominated by the piston surface area. Better air utilization with the stepped-lip geometry, thanks to greater azimuthal spreading at the rim, a strong recirculating vortex in the squish region, and better mixing in the bowl, is responsible for better late-cycle combustion efficiency and lower soot emissions.