A modified loudness theory was proposed, which employed equivalent rectangular bandwidths instead of critical bands to enhance the loudness accuracy in a specific frequency range. The acoustic transfer function of the cochlea to increase the relevancy of the loudness results and human auditory sense was taken into account. Loudness simulation and optimization procedure for the internal combustion engine noise was proposed based on the modified theory. Finite element method, flexible multi-body dynamics theory and boundary element method were adopted to conduct the modal analysis, vibration response and structural radiated noise of the block of a four-cylinder diesel engine, respectively. Noise loudness was calculated with MATLAB program. The loudness in the interested frequency range decreases as block structure was optimized. The optimal block was cast for bench tests. Experimental results show that optimization can remarkably decrease engine noise loudness, and this validates the feasibility and effectiveness of the loudness theory and optimal scheme.