Pratt & Whitney, a unit of United Technologies Corp, also edged out Rolls Royce with its bid to supply a version of the geared turbo fan powering the Airbus A320neo and Bombardier's CSeries.
With the new engine, Embraer joins an industry push for more fuel-efficient jets. The trend intensified last year, when Boeing answered the new Airbus narrowbody with its own 737 MAX.
Embraer said the new PW1700G and PW1900G engines, along with redesigned wings, would offer "double-digit improvements" in fuel efficiency, noise, emissions and maintenance costs.
"This is more than just a new engine," said Paulo Cesar de Souza e Silva, the head of commercial aviation at Embraer. "This is a second generation of E-Jet to help us maintain our leadership of the 70- to 120-seat segment."
With approval from its board of directors in coming months, Brazil's Embraer, the world's No. 3 commercial planemaker, aims to overhaul its E-Jets and begin delivering the new planes in 2018.
Silva said there would then be a three- or four-year overlap between generations as the new aircraft enter service.
Embraer's New York-listed shares dropped 5.5 percent after analysts at J.P.Morgan warned that the company would need to cut production due to a dwindling order backlog.
The existing E-Jet family has made Embraer the world's largest regional jet maker, but Canada's Bombardier won a major order from Delta Air Lines in December, helping to steal the 2012 sales lead and reignite their historic rivalry.
Silva said the next generation of E-Jets would have little effect on negotiations to modernize the regional fleets of U.S. carriers United and American Airlines.
Demand from those airlines is focused in the shorter term, he said, as they swap smaller regional jets for larger, more efficient planes after loosening their pilot contracts. (Reuters)