This paper is a numerical simulation that was made in the three-dimensional flow, carried out in a modified centrifugal compressor, having vaned diffuser stage, used as an auto-motive turbo charger. Moreover, the performance of the centrifugal compressor was dependent on the proper matching between compressor impeller and vaned diffuser, influencing significantly surge and the efficiency of centrifugal compressor stages. In addition, a modified compressor impeller, coupled with vane and vaneless diffuser, has been found to have similar internal flow patterns for both the vaneless and vaned diffuser design. The vaned diffuser effect has been paid particular attention in terms of better analysis where the diffuser was designed for high sub-sonic inlet conditions. Another aim of this research was to study and simulate the effect of vaned diffuser on the performance of a centrifugal compressor. The simulation was undertaken by using a commercial software, the so-called ANSYS CFX, to predict numerically the performance in terms of pressure ratio, poly tropic efficiency and mass flow rate for the centrifugal compressor stage. The results were generated from CFD and were analyzed for better understanding of the fluid flow through centrifugal compressor stage. Conclusively, it was observed that the effect of the vaned diffuser is to convert the kinetic energy into a high static pressure after analyzing the results of the simulation.