The He 177 required at least a pair of 2,000 PS (1,973 hp, 1,471 kW) engines to meet performance requirements. However, no engine at the time developed such power. A four-engine version would have been possible with existing engines like the Daimler-Benz DB 601, but the four-engine layout would imply higher propeller drag for dive bombing. The use of only two propellers on a heavy bomber offered many advantages such as a substantial reduction in drag, reduction of dive instability, and a marked improvement in maneuverability. Indeed, the initial prototypes and pre-production models of the He 177 displayed an airspeed and maneuverability comparable to many heavy fighters of the time.

A He 177 having an engine maintenance overhaul.
[Source: Bundesarchiv, Bild 101I-676-7972A-14/Blaschka/CC-BY-SA]

For the He 177, Heinkel's chief designer, Siegfried Gunter decided to employ two of the complex Daimler-Benz DB 606 "power system" setups for propulsion. He had already employed these engines on the record breaking Heinkel He 119 reconnaissance aircraft prototypes. They consisted of a pair of DB 601 liquid-cooled 12-cylinder inverted-vee inline engines mounted side by side in a single nacelle - for the He 119, centrally within the fuselage, just behind its heavily glazed cockpit enclosure - driving a single propeller. The two component engines were inclined inwards by 30� so that the inner cylinder banks were disposed almost vertically. A single gear casing connected the front ends of the two crankcases, with the two crankshaft pinions driving a single airscrew shaft gear. The starboard DB 601 had to be fitted with a mirror-image version of its mechanically driven centrifugal supercharger, drawing air from the starboard side of the engine. Two of the DB 606s, each of which initially developed 2,600 PS (2,564 hp, 1,912 kW) for take-off and weighing some 1,515 kg (3,340 lb) apiece, were to power the He 177.

The tendency of the DB 606 "power system" engine to ignite became increasingly serious as the test programme progressed and many of the He 177 A-0 series of pre-production prototypes were destroyed in accidents or engine related causes. The DB 606 engine had first been introduced on the Heinkel He 119 and later used on other aircraft such as the Messerschmitt Me 261 where they functioned as intended, but the extremely tight cowlings on the He 177 led to considerable problems, the most common being in-flight engine fires and engine overheating. There were several reasons for the flammability of the DB 606 engine, one of which was the common "central" exhaust manifold, serving a total of twelve cylinders, on the two inner cylinder banks of the twinned DB 601 component engines making up a DB 606. This central exhaust system would routinely become excessively hot and often caused the usual accumulation of oil and grease in the bottom of the engine cowling to catch fire. When the pilot thr ottled back there was a tendency for the injection pump to deliver more fuel than was required by the engine, in addition to which the injection pump connections leaked. In order to restrict the aircraft's weight, no firewall had been provided, and the DB 606 was fitted so close to the main spar - to the point that the rear two-thirds of the component powerplants' engine blocks were located behind the wing's leading edge - that there was insufficient space for the fuel/oil pipelines and electrical leads. The engine was frequently saturated by fuel and oil from leaking connections. At high altitude, the oil tended to foam due to a badly designed oil pump, and in this condition it circulated in the engines, its lubricating qualities being severely reduced. Insufficient lubrication resulted in the disintegration of the connecting rod bearings which could burst through either one of the component engine crankcases, puncturing the oil tanks which poured their contents on to the hot cen tral exhaust pipe collector.

The tightly packed nature of the "power system" engine installations on the He 177A, with the extreme rearwards location of the component engines in their nacelles placing them mostly behind the wing's leading edge, also led to very poor access to the engines as well as very poor ventilation. As a result of these factors, as well as a lack of routine maintenance in the field, the DB 606 powerplants easily caught fire in flight. The effort to create an adequately powerful engine for the He 177 by mechanically coupling two pairs of lower-power engines into two heavy "power system" powerplant setups, while theoretically sound, proved to be difficult and time consuming to perfect, leading to numerous engine complications especially on the initial production models.

Starting with the He 177 A-3/R2, a modified engine nacelle with a new "power system", the Daimler-Benz DB 610, each of which consisted of a pair of Daimler-Benz DB 605s set up to work as one as the DB 606 had been, was used to eliminate the tendency for engine fires. With the introduction of the DB 610 came several improvements including the relocation of the engine oil tank, the lengthening of the engine mountings by 20 cm (8 in), the complete redesign of the exhaust system which also facilitated the installation of exhaust dampers for night missions, and the setting of a power limitation on the engines which resulted in greater reliability. These modifications, supposedly numbering 56 of both major and minor varieties, were successful as far as eliminating engine fires were concerned, but other minor problems with the transfer gearbox between the two component engines of each "power system" and their shared propeller remained.

Oberst Petersen, as well as one Major Mons, through the Erorpbungsstellen personnel and establishments were responsible for backing the substantial numbers of upgrades to the He 177A from the time of the rescindment of its dive-bombing requirement onwards in September 1942.