The compression ignition internal combustion Rankine cycle (CI-ICRC) is a novel combustion cycle that integrates oxy-fuel combustion, direct water injection (DWI), and waste heat recovery into diesel cycle to achieve ultra-high thermal efficiency and zero emissions. NOX formation is eliminated by utilizing oxygen instead of air, and water is injected into the cylinder to improve thermal efficiency. To achieve over 50% indicated thermal efficiency in the CI-ICRC engine, a thermodynamic model of the CI-ICRC engine is established in this paper to explore the potential thermal efficiency and boundary under different DWI strategies. Theoretical results demonstrate that the thermal efficiency of CI-ICRC engine is mostly affected by DWI mass and temperature, the thermal efficiency is dramatically enhanced as DWI mass and temperature increase. Under a water-to-fuel ratio of 20 and DWI temperature of 423K, the calculated thermal efficiency reaches 76.8%. Moreover, exhaust waste heat is mainly recovered through DWI, which increases the working fluid within the combustion chamber, thereby increasing the expansion work and improving cyclic thermal efficiency. Additionally, specific heat ratio of the mixture within the cylinder can be enhanced by 0.04 through DWI, improving the thermal efficiency by 9% at an in-cylinder temperature of 800 K.