A high efficiency steam engine or steam expander includes a cylinder, cylinder head and piston in which cylinder clearance volume is zero or nearly zero together with a negligible amount of compression such that any pressure in the cylinder clearance volume just before the power stroke is as low as ambient pressure or condenser pressure to provide superior thermal efficiency in a compact compound engine having a high pressure expansion chamber within the piston and low pressure chamber in the cylinder. The inlet valve is opened slightly by piston movement and a steam assist force then drives it to its fully open position. Steam passes from the high pressure chamber to the low pressure chamber through a transfer valve located in the head of the piston and steam is released through an automatic exhaust valve in the cylinder head.