Engine efficiency is often controlled in an indirect way through combustion timing control. This requires a priori knowledge of where to phase the combustion for different operating points and conditions. With cylinder individual efficiency estimation, control strategies aiming directly at fuel consumption optimization can be developed. This paper presents a method to estimate indicated efficiency using the cylinder pressure trace as input. The proposed method is based on a heat release calculation that takes heat losses into account implicitly using an estimated, CAD resolved polytropic exponent. Experimental results from a multi-cylinder engine show that with this approach, the estimated efficiency error is within 5% for all operating points tested. The final part of the paper is a discussion of how to use the efficiency estimation for feedback control. Different control concepts are presented as well as suggestions on how to handle the non-linear connection between combustion timing and indicated efficiency.