Effects of newly developed water-emulsified fuel on diesel combustion and NO_x formation process were investigated under various equivalence ratio, ambient temperature, water content and fuel injection pressure conditions using a rapid compression machine and a total gas-sampling device. The results show emulsified fuels promote the diffusion combustion in spite of a little higher premixed combustion due to the longer ignition delay and therefore total heat release increase with short combustion duration. Emulsified fuels shorten NO_x formation duration and lower final NO_x concentration compared with that in diesel fuel. NO_x reduction is remarkable under enhanced diffusion combustion.