The TCe 130 turbocharged engine was co-developed over the past two years by Renault and alliance partner Nissan as part of the companies' strategy to make engines smaller while boosting their size-to-output performance ratio.
The Nissan Micra derived engine produces 130 horsepower (96kW) in the new turbo-charged format and boasts CO2 emissions of just 153 grams per kilometre.
Renault will offer the engine in its Megane range from next year. Nissan also plans to use the powerplant in its future medium-sized models (think Tiida).
Renault invested 42.8 million euros ($84.1 million AUD) at Valladolid in preparation for full series production of the engine.
The factory has the capacity to manufacture up to 645 engines daily.