The objective of this study is to analyze the effects of heat loss and variable specific heats of working fluid on the performance of an Atkinson engine by using finite-time thermodynamics. The variations in power output and thermal efficiency with compression ratio, and the relations between the power output and the thermal efficiency of the cycle are presented. The results show that the power output as well as the efficiency where maximum power occurs decrease with the increase of heat loss. The thermal efficiency increases with increasing compression ratio. The thermal efficiency is the greatest when the specific heat model proposed by Sonntag et al.  is used in the analysis. Both the constant model and the linear model of specific heat underpredict the thermal efficiency of the cycle.