Diesel/water emulsions with 1, 2, 5, 10, and 20% water were studied in an optically-accessible direct injection (DI) diesel engine to identify the changes that occur in the spray and combustion processes, as well as soot production during combustion. For each fuel, pressure traces were recorded and analyzed to obtain information on ignition delay and the rate of energy release. In addition to the heat release analysis, direct photography of the combustion event was obtained using a CCD camera to observe the development of the sprays and the flame patterns. Laser light extinction was applied to investigate the evolution of soot during combustion. The heat release results for the emulsions show an increase in the ignition delay time and premixed burn fraction with increasing water content. The spray images showed no major changes with increasing water content; however, the flame images indicated that a significant reduction in the amount of soot occurred as water content increased. The laser light extinction measurement provided quantitative evidence of the soot reduction indicating reductions up to nearly 50% at 20% water.