Oil-burning motors form a major part of the strategy being developed to enable the firm to step up its competitive stance against Mercedes-Benz and BMW.
Due to be introduced in three years' time, the common-rail engines will complete a package of at least 14 new Jaguar product announcements, revealed managing director Jonathan Browning.
He said: 'The new X400 range to be revealed in the next 12 months will be a strong contender across all major world sales areas and will lead the drive to take annual production volume to the 200,000 level. Following that, we will launch other products, additional model derivatives and a series of new power unit options.
'This model development programme heralds a dramatic change from our historic position in the market and will result in a vastly expanded portfolio.'
'After selling more than 75,000 vehicles last year - 50% up on 1998 - our registrations are running 75% ahead year-to-date. But the key thing to remember is that we are only part of the way through our transformation - we expect things to be very different three years from now.'
Jaguar chairman, Dr Wolfgang Reitzle, said it was likely the diesels would be built by Ford, which runs Jaguar, Volvo and Land Rover as part of its Premier Automotive Group.
'We could sell many more cars right now if we had competitive diesels,' said Reitzle. 'Our plans are not finally decided, but I'm going for an in-house family for use by the group's top cars. We have to have diesels that are especially smooth - in Europe, it is no longer possible to have a luxury car business without the next-generation common-rail diesel.'
He added that Jaguar would take care not to put its badge on products simply to create more volume. 'We have to make sure a Jaguar remains a Jaguar. If we execute our cars in the perfect way - which is how I want to do it - we will have a unique combination of top technology and beautifully-detailed craftsmanship.'