Provided is a thermally efficient Stirling cycle engine including: a casing; a cylinder housed within the casing; a piston reciprocatable inside said cylinder; a displacer reciprocatable with a phase difference relative to the piston; a compression chamber defined between the piston and the displacer; an expansion chamber arranged on a first side of the displacer with a second side thereof opposite to the compression chamber; a heat exhausting unit arranged in the neighborhood of the compression chamber; a heat absorbing unit arranged in the neighborhood of the expansion chamber; a regenerator arranged between the heat exhausting unit and the heat absorbing unit; and a heat exhausting chamber defined between an outer surface of the casing and an inner surface of the heat exhausting unit, said heat exhausting chamber in communication with the compression chamber and the regenerator respectively through a first passage and a second passage provided in the casing.