A small watercraft includes a lubrication system having at least one pump, a lubricant reservoir, and a lubricant filter. The lubricant pump is configured to circulate lubricant between the reservoir, the filter and the engine. The lubricant filter is arranged either on a forward side or a rearward side of the lubricant reservoir. Alternatively, the lubricant filter may be mounted on a side of the engine opposite the lubricant reservoir and on a forward side or rearward side of the exhaust manifold. Further, the lubricant pump and the lubricant reservoir may be mounted rearward from a rear end of the engine body. Each of the arrangements provide an engine having a compactly arranged lubrication system which minimizes the affect on the overall width of the engine caused by the lubrication system.