EXPERIMENTAL RESULTS are presented for the effects of water in #2 diesel fuel emulsion on engine performance and combustion for a two cylinder laboratory engine of GE-7FDL series diesel engine parameters. Smoke, NOx, and CO emissions were decreased as the water amount in fuel was increased. At the maximum tested amount of about 30% water, smoke reading was reduced by half (Bosch number) and NOx reduced by 50% at full load. Fuel consumption can be lowered somewhat by adding water also. The potential of fuel savings is about 1-2%. it is more at the lower intake pressure notch 5 load than notch 8 load with higher intake pressure. Both emissions reduction and fuel saving were realized at the expense of increased engine running roughness.