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Research conducted at the Supercritical (SC) facility of MIT's Energy Laboratory provided visual confirmation of a single phase, homogeneous water/fuel mixture near the critical temperature and pressure of water. Equal volumes of water and diesel fuel were observed to be completely miscible, and high temperature polymerization of fuel molecules was not found. This is believed to be the first observation of a solution of diesel fuel and water. This mixture was subsequently burned under atmospheric spray conditions with very low NOx, smoke, CO, and HC. The results suggested that in-cylinder combustion in a compression ignition engine was warranted. Tests were conducted in a single cylinder, air-cooled, naturally aspirated, 3.5 horsepower Yanmar diesel engine. The compressibility of this new fuel composition necessitated a modified injector to provide smooth operation.