Fuel economy along with high thermal efficiency is the main incentive of diesel engine applications. However, pollutant gasses exhausted from diesel engines are considered as the important sources of air pollution. Emulsification the fuel by different percentage of water has been studied in this research and its effect on pollutant emissions has been investigated. Considerable reduction in NOX emission and less specific fuel consumption were observed when emulsified fuels were used. To determine the optimum water/diesel ratio, a factor (SEF) has been defined in this article which demonstrated that emulsified fuel 20% had the best performance comparing to 10%, 15%and neat diesel.