Many technologies have been developed to improve diesel emissions or performance, however NOx/PM trade-off occurs because normal methods that reduce NOx emissions tend to increase PM emissions. On the other hand many measures used to control PM emissions tend to increase NOx emissions. Thus, simultaneously controlling both NOx and PM emissions has become a significant challenge for diesel engine manufacturers. As one of the measures, the technology using emulsified fuel has recently become important under the stringent emission regulations of diesel engines. This paper investigates injection characteristics of emulsified fuel and its effect on a combustion performance in a diesel engine. In order to supply emulsified fuel into injection system a mixing unit produced by Harrier is used, then the fuel mixed with water is supplied into injector directly. The spray injected is investigated with a shadowgraph photo system and injection analyzing apparatus, then applied into a diesel engine. Those results showed that the emulsified fuel has an effect on reducing both NOx and PM.