Arising concerns over the energy crisis and ambient air pollution has motivated research into clean alternative fuels for use in internal combustion engines, from which it has been discovered that biodiesel can be used to partially replace fossilized fuels. However, the excess oxygen that is inherent in biodiesel causes an increase in the peak temperature during combustion, increasing NO_x formation. The aim of this study is to investigate the effects of water emulsification on engine performance, combustion characteristics, and exhaust emissions. The experiment was carried out using conventional diesel, blended fuel B20, and B20 that has been emulsified with 5% water (B20E5), 10% water (B20E10), 20% water (B20E20), and 30% water (B20E30). Results indicate that a 28.4% improvement in the engine torque and a reduction of 7.27% BSFC was achieved using B20E5. A significant reduction from 52.1 to 46.4 bar was also observed in the peak in-cylinder pressure with B20E5. The 30% water content in the blended fuel B20 reduced the NO_x emissions by as much as 26.17% compared to diesel fuel. Overall, the emulsification of biodiesel-diesel with water is found to be effective in tackling concerns about emissions, especially nitrogen oxides (NO_x), with no penalty to engine performance.