The two most important issues for diesel engine system engineers to handle engine applications are how to coordinate technical relationships in an organization/team and how to acquire working knowledge of different applications for system integration. This paper is the first part of a series of three inter-related papers (parts) addressing diesel engine applications (i.e., Part 1 - the relationship among applications, engine system design, systems engineering, and organization structure; Part 2 - general performance characteristics of diesel engine applications; and Part 3 - specific or special emissions, operating, and design characteristics of different applications). Specialization, departmentalization, and integration are the three most critical aspects in organization design for engine product development. This paper provides a complete theory of organization structure design from the following perspectives to address those aspects: unique elements in activities, system integration processes, and rational productivity management. The paper combines classical and modern organization theories and offers a unique elements-led logical approach for planning product development organization structures based on formal academic theories. Eight rational principles of organization design are summarized. Four key elements in product development are distilled. An elements-driven organization design approach (i.e., element grouping) is developed, along with an introduction of the traditional processes-driven design approach (i.e., process grouping). Eight organization structure rules are proposed. Good and bad organization structures are discussed. The meaning of “integration” for engine applications is clarified. A rational engineer productivity measurement system is developed. The paper initiates the study of organization theory in the areas of organizational studies, management, and systems engineering in engine development. Although this paper is primarily written for engine system design engineers and application engineers, it is also useful for other design, analysis, or testing engineers and managers/executives because they can benefit by understanding the entire system and organization as a whole.