For meeting 21st-century exhaust emission standards for HD diesel engines, new methods are necessary for reducing NOx and PM emissions without increasing fuel consumption. The stratified diesel fuel-water-diesel fuel (DWD) injection in combination with exhaust gas recirculation (EGR) is as a means for NOx and PM reduction without any negative effect on fuel economy. The investigation was performed on a charged HD single-cylinder direct-injection diesel engine with a modern low-swirl combustion system, 4-valve technology and high pressure injection. The application of DWD injection combined with EGR resulted in a 60 percent lower NOx emission at full load and a 75 percent reduced NOx emission at part load when compared with present day (EURO II) technology. This was achieved without any fuel economy penalty, but with an additional PM emission reduction. The European EURO IV emission limits under discussion of NOx < 3.0 g/kWh and PM < 0.01 g/kWh appear to be achievable with retained fuel economy. The disadvantage of the DWD+EGR technology, however, is the fairly large expenditure. Particularly for vehicle application some more technical solutions will have to be developed, e.g. anti-freezing and safety functions in case of water failure.