The effects of in-cylinder water injection on a direct injection (DI) Diesel engine were studied using a computational fluid dynamics (CFD) program based on the Kiva-3v code. The spray model is validated against experimental bomb data with good agreement for vapor penetration as a function of time. It was found that liquid penetration increased approximately 35% with 23% of the fuel volume replaced by water, due mostly to the increase in latent heat of vaporization.Engine calculations were compared to experimental results and showed very good agreement with pressure, ignition delay and fuel consumption. Trends for emissions were accurately predicted for both 44% and 86% load conditions. Engine simulations showed that the vaporization of liquid water as well as a local increase in specific heat of the gas around the flame resulted in lower Nitrogen Oxide emissions (NOx) and soot formation rates. Using stratified fuel-water injection increases soot at 86% loads due in part to late injection. Because NOx decreased at all loads, the injection timing can be advanced to minimize fuel consumption and soot.