The present paper investigates the heat characteristics of oscillatory piston-driven flow inside thermal-lag type Stirling engine. The geometry consists of a cylinder partially filled with a porous metal structure called regenerator, heated at the lateral wall on one side and cooled on the other side. Brinkman-Forchheimer-Lapwood extended Darcy model is assumed to simulate heat transfer within the regenerator. A numerical model is used to evaluate average entropy generation rate in the regenerator depending on its characteristics (form factor Lr /Dr, porosity and material) and on the oscillatory flow characteristics (working fluid, rotational engine speed, hot end temperature and initial pressure). The output power of the thermal lag Stirling engine is estimated for different working conditions. Results show that, the two main contributors to entropy generation in the regenerator are: entropy due to heat transfer (imperfection loss, internal conduction loss) and entropy due to viscous friction. Regenerator design leading to minimum entropy generation was investigated.