Homogeneous charge compression ignition (HCCI) is an advanced combustion concept that is developed as an alternative to diesel engines with higher thermal efficiency along with ultralow NOx and PM emissions. To study the performance of this novel technique, experiments were performed in a two cylinder engine, in which one cylinder is modified to operate in HCCI mode while other cylinder operates in conventional CI mode. The quality of homogeneous mixture of air and fuel is the key feature of HCCI combustion. Low volatility of diesel is a major hurdle in achieving HCCI combustion because it is difficult to make a homogeneous mixture of air and fuel. This problem is resolved by external mixture preparation technique in uses a dedicated diesel vaporizer with an electronic control system. All the injection parameters such as fuel quantity, fuel injection timing, injection delay etc., are controlled by the injection driver circuit. To study the effect of exhaust gas recirculation on combustion and emission behavior, two different EGR conditions (0% and 15%) are investigated. Results show superior emission characteristics of HCCI combustion as compared to conventional CI combustion and gives up to 80% and 50% reduction in NOx and smoke respectively. However HC and CO emissions are slightly higher as compared to conventional combustion. Application of EGR controls the combustion rate significantly and improves emission behavior at a cost of slightly inferior performance.