Clean Diesel Technologies Reports 2005 Second-Quarter Results; Company Also Announces Receipt of Additional Grants or Awards in Three U.S. States.

STAMFORD, Conn. -- Clean Diesel Technologies Inc. (Clean Diesel) (OTCBB:CDTI) (AIM:CDT) (AIM:CDTS), a developer of chemical and technological solutions to reduce harmful engine emissions, today reported results for the second quarter and first half of 2005, and announced that it has been chosen for grants or awards in the states of Texas, New York and Massachusetts. Total revenue for this year's second quarter was $268,000 with a net loss of $1,286,000, or $0.07 loss per share, versus revenue of $93,000 and a net loss of $885,000, or $0.06 loss per share, for the second quarter of 2004. For the first six months ended June 30, 2005, total revenue was $460,000 with a net loss of $2,477,000, or $0.14 loss per share. In the comparable 2004 period, revenue was $287,000 and a net loss of $1,693,000, or $0.11 loss per share.

Completion of two previously announced State of Pennsylvania demonstration programs boosted Clean Diesel's revenue with sales of the verified Platinum Plus(R) Purifier diesel-oxidation catalysts (DOC) and fuel-borne catalyst (FBC). The company supplied systems for 125 beverage-delivery and waste-hauling vehicles in southeastern Pennsylvania. The increase in Platinum Plus FBC revenue is also the result of the ongoing sales to fleets and expanded market share in the U.S. mining sector.

Clean Diesel said that its increased sales and marketing initiatives are beginning to generate results. In the last two months: the Platinum Plus FBC has been selected in competitive bidding for grants or awards by the Texas Council of Environmental Quality, for demonstration of the company's cleaner burning biodiesel blend; the Platinum Plus FBC/DOC was chosen by the New York State Energy Research Development Authority for application to ferries and marine vessels; and the state of Massachusetts selected the verified FBC/DOC and FBC catalyzed wire-mesh filter (CWMF) for use with public and municipal buses and vehicles.

Clean Diesel has recently commenced a program with Rhodia, the current FBC supplier for over 1 million vehicles in Europe, to demonstrate the performance benefits, lower cost and improved durability of the Platinum Plus FBC with particulate filter-based systems on light- and medium-duty original equipment manufacturers (OEMs). The use of the Platinum Plus FBC is expected to reduce life cycle platinum requirements of the filter systems by over 50 percent.

Clean Diesel expects revenue growth in the near term as local and state funding becomes more available and its technologies continue to gain broader acceptance. The recently approved U.S. House bill and Senate bill to provide $1 billion, over five years, to support retrofit of existing engines would greatly increase the funds available to "clean-up" the 11 million existing diesel engines in the U.S.

Clean Diesel CEO Bernhard Steiner said: "Good progress has been made on attracting interest from U.S. and European OEMs and tier-one suppliers in licensing the company's ARIS injector system for urea selective catalytic reduction (SCR)-based NOx reduction and the exhaust gas recirculation (EGR)/SCR technology. The patented EGR/SCR system can achieve the stringent 2010 NOx limits."

In addition, Clean Diesel recently announced that Dr. Walter Copan has joined the company as its vice president and chief technology officer. Copan was principal licensing executive, technology transfer, for the U.S. Department of Energy's National Renewable Energy Laboratory (NREL), where he was responsible for the commercialization of clean energy, energy efficiency and related technologies through partnerships with industry, academia, and government. Prior to his tenure with NREL, Copan spent 28 years with the Lubrizol Corp. in a number of positions in research and development, engineering, product development, strategy, international business development, and new ventures.

Full financial information is included in the company's Form 10-Q filed with the Securities and Exchange Commission (www.SEC.gov).

About Clean Diesel Technologies Inc.

Clean Diesel Technologies Inc. and its U.K. representative office, Clean Diesel International LLC, is a developer of chemical and technological solutions to reduce harmful engine emissions. Clean Diesel Technologies has patented products that reduce emissions from combustion engines while simultaneously improving fuel economy and power. Products include Platinum Plus(R) fuel-borne catalysts (FBC), the Platinum Plus Purifier System and the ARIS(R) 2000 urea-injection systems for selective catalytic reduction of NOx. Platinum Plus and ARIS are registered trademarks of Clean Diesel Technologies Inc. For more information, visit CDT at www.cdti.com or contact the company directly.

Certain statements in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known or unknown risks, including those detailed in the company's filings with the Securities and Exchange Commission, uncertainties and other factors which may cause the actual results, performance or achievements of the company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

TABLES FOLLOW

CLEAN DIESEL TECHNOLOGIES INC.
                       STATEMENTS OF OPERATIONS
                              (Unaudited)
                 (in thousands, except per share data)

                                  Three Months Ended Six Months Ended
                                       June 30,          June 30,
                                    2005      2004    2005     2004
Revenue:
Additive revenue                        $91     $56     $186     $113
Hardware revenue                        166      25      258      144
License and royalty revenue              11      12       16       30
Total revenue                           268      93      460      287

Costs and expenses:
Cost of revenue                         161      53      271      185
General and administrative            1,210     821    2,375    1,611
Research and development                 88      90      147      170
Patent amortization and other
 expense                                 25      27       64       39

Loss from operations                 (1,216)   (898)  (2,397)  (1,718)
Other income (expense)
Foreign currency exchange
 gain/(loss)                            (75)     --      (94)      --
Interest income                           5      13       14       25

Net loss attributable to common
 stockholders                       $(1,286)  $(885) $(2,477) $(1,693)

Basic and diluted loss per common
 share                               $(0.07) $(0.06)  $(0.14)  $(0.11)

Weighted average number of common
 shares outstanding - basic and
 diluted                             17,171  15,679   17,168   15,679



                    CLEAN DIESEL TECHNOLOGIES INC.
                             BALANCE SHEET
                   (in thousands, except share data)

                                                   June 30,   Dec. 31,
                                                     2005       2004
                                                  (Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents                             $1,525   $4,265
Accounts receivable, Net                                 255      145
Inventories                                              338      387
Other current assets                                     113       71
Total current assets                                   2,231    4,868
Patents, Net                                             537      418
Fixed asset, Net                                         203      200
Other assets                                              27       27
Total assets                                          $2,998   $5,513

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued expenses                   $282     $391
             Total current liabilities                   282      391

Stockholders' Equity:
Preferred stock, par value $0.05 per share,
 authorized 100,000 and 80,000 shares
 respectively, no shares issued and outstanding           --       --
Common stock, par value $0.05 per share,
 authorized 30,000,000, issued and outstanding
 17,193,047 and 17,165,868 shares respectively           860      858
Additional paid-in capital                            38,500   38,431
Accumulated deficit                                  (36,644) (34,167)
Total stockholders' equity                             2,716    5,122
Total liabilities and stockholders' equity            $2,998   $5,513