The engine, wholly developed in Sweden, will join the class-leading four-cylinder Drive-E engines in displaying Volvo's engineering prowess and commitment to efficient power.
Dr Peter Mertens, Senior Vice President Research & Development at Volvo Car Group, said: "We have come a long way in the last few years at Volvo.
"Investments from our parent company, Zhejiang Geely Holding Group, have enabled us to recapture our position as a leader in the field of powertrain engineering.
"The development programme for the new three-cylinder engine is very advanced, and we have already begun prototype testing of the unit."
Volvo has a long history of developing its own unique six, five and four-cylinder engines and in-house expertise. The move to include a three-cylinder in Volvo's engine programme is a natural next step in Volvo's strategy of downsizing.
The application of class-leading technology and analysis techniques enables more power and better fuel economy from smaller displacement internal combustion engines than ever before.
Michael Fleiss, Vice President Powertrain at Volvo Car Group, said: "We have learned a lot from the development of our four-cylinder Drive-E engines and translated this into a highly responsive, compact and powerful premium-quality three-cylinder engine.
"The engine is being developed primarily with our new CMA architecture in mind but will also provide power for our 60 Series cars, thanks to Volvo's advanced turbo technologies, while also meeting Euro 7 emission targets.
