Water vapour is a main constituent of exhaust gas recirculation (EGR) in diesel engines and its influence on combustion and emissions were investigated. The following effects of the water vapour were examined experimentally: the effect of replacing part of the inlet charge oxygen (dilution effect), the effect of the higher specific heat capacity of water vapour in comparison with that of oxygen it replaces (thermal effect), the effect of dissociation of water vapour (chemical effect), as well as the overall effect of water vapour on combustion and emissions.Water vapour was introduced into the inlet charge, progressively, so that up to 3 percent of the inlet charge mass was displaced. This was equivalent to the amount of water vapour contained in 52 percent by mass of EGR for the engine operating condition tested in this work.The introduction of water vapour in the inlet charge resulted in a slight increase in the ignition delay, and a slight decrease in the peak cylinder gas pressure and temperature. The reduction in NOx emissions was mainly due to the dilution of the inlet charge with water vapour while the higher specific heat capacity had a considerable effect too. The separate effects of water vapour on the unburnt hydrocarbon emissions (UHC) were minor, whereas the overall effect was relatively substantial.The introduction of water vapour resulted in an increase in the particulate and smoke emissions. Part of this increase was due to the dilution effect of the inlet charge with water vapour. The algebraic addition of the dilution, the chemical, and the thermal effects on the UHC and the volatile fraction of the particulates was not equal to the overall effect of water vapour. This indicated that there might be an additional (but not identified) effect that increased the volatile organic fraction as well as the UHC emissions. Alternatively, it is suggested that the sum of the separate dilution, chemical, and thermal effects of water vapour on, for example, ignition delay and, thereby, emissions may be different from that of the overall effect of water vapour on ignition delay and emissions.This is the third paper in a series which deals with the effects of EGR on combustion and emissions in diesel engines. The first and second papers are SAE 961165 and SAE 961167, respectively.