The engine, rated at 207hp and 440Nm of torque, meets the Euro 4 emission rules when equipped with a particulate filter.
The engine will debut in the first half of 2004 in the S-type sedan, initially in a version that conforms to Euro 3 standards.
So far there are no plans to use the diesel the Jaguar XJ, but it will soon be used in one of the large models at Ford subsidiary Land Rover.
The new engine was designed, engineered and tested at the Ford design center in Aachen, Germany.
Nick Scheele, Ford Motor Co. chief operating officer, said: "This is a top-class premium diesel engine."