Air-cooled engines rely on the circulation of air directly over hot parts of the engine to cool them.
Most modern internal combustion engines are cooled by a closed circuit carrying liquid coolant through channels in the engine block, where the coolant absorbs heat, to a heat exchanger or radiator where the coolant releases heat into the air. Thus, while they are ultimately cooled by air, because of the liquid-coolant circuit they are known as water-cooled. In contrast, heat generated by an air-cooled engine is released directly into the air. Typically this is facilitated with metal fins covering the outside of the cylinders which increase the surface area that air can act on.
In all combustion engines, a great percentage of the heat generated (around 44%) escapes through the exhaust, not through either a liquid cooling system nor through the metal fins of an air-cooled engine (12%). About 8% of the heat energy finds its way into the oil, which although primarily meant for lubrication, also plays a role in heat dissipation via a cooler. 
Many motorcycles use air-cooling for the sake of reducing weight and complexity. Few current production automobiles have air-cooled engines (such as Tatra 815), but historically it was common for many high-volume vehicles. Examples of past air cooled road vehicles include:
- Porsche 356 (1948-1965)
- VW-Porsche 914 (1969-1976)
- Porsche 911 (1964-1998)
- The Volkswagen Beetle, Type 2, SP2, Karmann Ghia, and Type 3 all utilized the same air cooled engine (1938-2003) with various displacements.
- Volkswagen Type 4 (1968-1974)
- Chevrolet Corvair (1960-1969)
- Citroën 2CV (1948-1990) (Featured a high pressure oil cooling system, and used a fan that was both axial and radial).
- Citroën GS and GSA
- Honda 1300 (1969-1973)
- The East German Trabant (1957-1991)
- Tatra T77 (1934-1938)
- Tatra T87 (1936-1950)
- Tatra T97 (1936-1939)
- Tatra T600 Tatraplan (1946-1952)
- Tatra T603 (1955-1975)
- Tatra T613 (1974-1996)
- Tatra T700 (1996-1999)
- NSU Prinz
- Tatra (company) all wheel drive military trucks.
Some small diesel engines, e.g. those made by Deutz AG and Lister Petter are air-cooled. Probably the only big Euro 5 truck air cooled engine (V8 320 kW power 2100 Nm torque one) is being produced by Tatra.