In order to confront the increasing air pollution and the tightening emission restrictions, this research developed a diesel engine using DME, the advanced smoke-free alternative fuel. By numerical analysis, flow field, spray, and combustion phenomenon of the DME engine was presented. Using an experimental method, the configuration of the fuel supply system and operation/power performance was tested with the current plunger pump. Most emission performance, especially smoke performance was significantly improved. The possibility of conversion from the current diesel engine into the DME engine was affirmed in this research. However, it was found that the increase of engine RPM and fuel amount need to be properly adjusted through matching the characteristics of fuel and injector for further improvement.