Combustion characteristics of the emulsified diesel fuels are investigated in a Rapid Compression and Expansion Machine(RCEM). Among the test cases the 40 W/O fuel injected at BTDC 20° has shown the best performance with respect to the efficiency and NOx and soot emissions. The pressure trace of the 40 W/O fuel is characterized by a longer ignition delay and a lower rate of pressure rise in premixed combustion. High speed photographs show reduced flame luminosity and lower flame temperature with the increasing W/O ratio. Micro-explosions of emulsified fuel droplets which affect the local shape and brightness of the flame are identified in magnified flame images.