A computational model of a micro internal combustion swing engine (MICSE) is established. The mechanism of the heat transfer and its scale effect on the system performance are analyzed. The results show that the heat exchange between the gas and the solid wall occurs in a thin thermal buffer layer close to the contact area. In the intake process, the hot thermal buffer layer heats the intake gas, thereby reducing the intake air mass, resulting in a compression ratio drop. While in the power process, the heat transfer from the gas to the thermal buffer layer reduces the work output. Hence the thermal efficiency declines. The smaller the engine scale is, the gas temperature in the intake stroke increases for the influence of the thermal buffer layer, the less the dimensionless inlet air mass and the compression ratio will be. While in the power process, the ratio of the thermal transferred from the gas to thermal buffer layer to the fuel chemical energy increases with the reduction of engine scale. Therefore, the heat transfer enhances and the thermal efficiency drops with the reduction of the engine scale.