NASA selected the thruster, developed by Alec Gallimore, from University of Michigan in US as part of its Next Space Technologies for Exploration Partnerships, or NextSTEP programme.
NextSTEP encompasses a set of projects aimed at improving small satellites, propulsion and human living quarters in space.
These are milestones towards sending humans into orbit between the Earth and the Moon in the 2020s and to Mars the following decade.
The thruster 'X3' is central to the the propulsion system, dubbed the XR-100.
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The X3 is relatively small and light for thrusters of its design power, 200 kilowatts. Its core technology - the Hall thruster - is already in use for manoeuvring satellites in orbit around the Earth.
"For comparison, the most powerful Hall thruster in orbit right now is 4.5 kilowatts," said Gallimore.
That is enough to adjust the orbit or orientation of a satellite, but it is too little power to move the massive amounts of cargo needed to support human exploration of deep space, researchers said.
On their whirlwind journey from the negative electrode at the exhaust end to the positively charged electrode on the inner side of the channel, they run into atoms (typically xenon gas) that are fed into the chamber.
The collisions knock electrons off the xenon atoms and turn the xenon into positively charged ions.
The electrons' spiralling motion also builds a powerful electric field that pulls the gas ions out the exhaust end of the channel.
"When they're ionised, the xenon atoms can shoot out at up to 30,000 meters per second, which is about 65,000 mph," said Gallimore.
The X3 contains three of these channels, each a few centimetres deep, nested around one another in concentric rings. The nesting is what allows the Hall thruster to operate at 200 kilowatts of power in a relatively small footprint.