• An approach based on CSAE cycle was proposed for IC engine WHR. • Steam temperature has a greater effect on WHR potential compared with steam amount. • The NA mode is recommended for the steam expansion cylinder. • Engine brake efficiency can be increased by 7.0 percent points at most by CSAE cycle. • The proposed WHR approach has little effect on the engine BMEP. To recover waste heat and increase the fuel efficiency of internal combustion engines, an approach based on in-cylinder steam–air expansion is proposed, which has simpler design but higher practicality than previous methods. In the multi-cylinder engine, a cylinder is specially used for steam expansion (called steam expansion cylinder) without fuel entry and firing. The high-temperature steam generated by engine waste heat is injected into the steam expansion cylinder, in which it expands together with air and outputs effective work. The energy-saving potential and influencing factors of this approach were investigated on a six-cylinder natural gas engine through the simulation and some interesting findings were obtained. At the same engine operating conditions, the steam temperature has greater effects on waste heat recovery potential than steam amount. The cycle work of the steam expansion cylinder is improved largely by introducing air. However, if further increase intake pressure (e.g., greater than 0.4 bar), the improvement of cycle work in the steam expansion cylinder is not obvious, thus the naturally aspirated mode is recommended. When this approach is applied, the maximum brake mean effective pressure is approximately equal to the level of the original engine at 1600 rpm and 2000 rpm but slightly lower at 1200 rpm. Nevertheless, the brake efficiency of the engine has an obvious rise at all three speeds, which could increase by up to 5.7, 7.0 and 6.8 percentage points at 1200 rpm, 1600 rpm and 2000 rpm, respectively. Therefore, the proposed approach can effectively recover engine waste heat with little effect on power performance.