Diesel engines exhausting gaseous emission and particulate matter have long been regarded as one of the major air pollution sources, particularly in metropolitan areas, and have been a source of serious public concern for a long time. There has been numerous research in the field of reduction of these pollutants since diesel engines came to major use. Major emissions from a diesel engine are NOx, SOx, CO and particulate matter (PM).amongst these pollutants CO and SOx and some quantity of particulate matters are reduced by some after treatment methods, outside the engine, in the catalytic converter etc. unlike these NOx can’t be oxidized to get some clean product. Nowadays NOx emissions are reduced by selective catalytic reduction. Using an emulsion of diesel in water as a fuel has been a recent field of study in this field. Water/diesel (W/D) emulsified formulations are reported to reduce the emissions of NOx, SOx, CO and particulate matter (PM) without compensating the engine’s performance. In this project a new kind of emulsion is prepared by mixed surfactant method, major concern being the long term stability of the same. Then performance and emission tests were carried out by using the fuel in a two cylinder water cooled diesel engine. The results were matched against that of diesel and comparison graphs were plotted to see what are the advantages and disadvantages of using the emulsion over diesel.