a two part variable compression ratio piston assembly for use in a two cycle internal combustion engine , the piston assembly including an outer member movable relative to an inner member to vary the compression ratio of the engine and a hydraulic system utilizing oil from the lubrication system of the engine to automatically control the relative movement of the members to maintain a predetermined maximum combustion chamber pressure . the hydraulic circuit includes an upper and a lower chamber which expands and contracts conversely upon relative movement of the piston members and further includes a pumping system for pumping oil to the upper chamber and to the lower chamber through the upper chamber to thereby vary the compression ratio of the piston . the lower chamber is disposed adjacent the piston ring area of the piston assembly and the hydraulic system includes a pressure responsive release valve to discharge oil from the upper chamber to the crankcase of the engine upon a predetermined pressure being produced in the upper chamber .