In 1939 work began on the development of liquid-cooled diesel engines. A variety of models were planned -- speed constant 1200-rpm engines for KOHLER generators; engines would range from single cylinder 5 hp to four-cylinder 20 hp. Variable speed engines up to 2400-rpms from 10 to 60 hp. High speed diesels from 5 to 20 hp for the U.S. Navy. Kohler also continued to make news on other fronts: "Increase in factory working time to the basic five-day 40-hour week" read the headline in Kohler of Kohler news.

In 1948, Kohler increased the company's focus on manufacturing engines by opening a small engines factory and introducing the first "stand alone" KOHLER engines for industrial applications. Just three years later, Kohler's K90 cast iron single cylinder air-cooled engine went into production, followed by the K160 in 1952. Throughout the fifties, Kohler added to its K-Series engines and in 1959 introduced the first of the four "interchangeable" models with common mounting foot pattern and crank height. The decade closed with the groundbreaking for a new Engine and Electric Plant building east of Pottery. The building opened for business in 1960 and would be the first of many Kohler "firsts" during the sixties. In 1965 the company introduced Automatic Compression Release (ACR) for use on KOHLER engines. This new technology allowed for more effortless recoil starts.

The company reached yet another impressive milestone in 1966, when the one-millionth engine came off the assembly line. In 1968, two-cycle engine production for the snowmobile industry began. Just eight years later Kohler shipped its one-millionth international engine in 1976.

The company made huge strides again in 1983 when the "New Shape of KOHLER Power" brought newly designed products and a revitalized commitment to quality within the engine division. Twin cylinder Series II models were launched featuring full-pressure lubrication, steel-backed sleeve bearings at both ends of the crankshaft, and a redesigned connecting rod to name a few. One year later Kohler introduced the first in a series of single and twin cylinder Magnum engines, the result of extensive engineering improvements and featuring a new, sleek restyling. These innovative engines included electronic ignition and superior air filtration for greatly improved reliability. In 1986 the first Magnum vertical shaft twin cylinder engines were introduced. The next year, Command engines were introduced with features including OHV design and hydraulic valve lifters for improved efficiency, longer life and quieter operation. In 1991, Command twin cylinder horizontal shaft engines were first introduced followed by vertical shaft twin cylinder engines for the commercial and consumer lawn and garden market.

1995 marked yet another category changing innovation from Kohler when overhead cam (OHC) engines were unveiled, a "first" in the industry. The company's relentless pursuit of quality and innovation was recognized in 1998 when Kohler received a prestigious award from the National Society of Professional Engineers for the innovative Overhead Cam (OHC) 18 HP engine. The award lauded the engine as the best new product of the thousands of new products introduced in 1998 by all major manufacturing companies. (In 1997, the same award went to Boeing Commercial Airplane Co. for its 777 jetliners.) That same year, the company began production at a new manufacturing facility in Hattiesburg, Mississippi.

In 1999 the Command PRO series was launched introducing both single and twin cylinder models. These premium engines were specifically targeted to the commercial turf and consumer garden tractors. The first Kohler liquid-cooled Aegis engine was also introduced in 1999. This top of the line engine was the first to offer a 3-year warranty.

The Courage engine entered the market in 2002 with new features including an inverted crankcase for leak-proof operation, dual-camshaft for superior cooling, a ported power intake for better power and combustion, and a cross-flow cylinder head for greater air-flow and cooler operation. Most recently in September of 2004 Kohler announced higher horsepower offerings, up to 31 horsepower available on its liquid-cooled Aegis engines.