A novel emulsion fuel with 82.4% diesel, 5% water and 12.6% nano-organic additives by volume is introduced in this work. Unlike other emulsion fuels (milky in color) developed around the world, it is green in color and very stable. The performance and emissions of the diesel engine fueled by the emulsion fuel are tested and compared with that of pure diesel. The results indicate that a better brake thermal efficiency can be achieved with the emulsion fuel. This is due to the micro-explosion phenomenon, i.e. the instantaneous and violent vaporization of the water droplets within the fuel droplets as the fuel is exposed. to high temperature gas, large fuel droplets are broken into many smaller droplets, thereby significantly improving fuel vaporization and combustion process. At the same time, NOx emission is reduced because of the presence of water, which brings down the peak flame temperature. The PV diagram is also measured and the heat release rate is calculated. It is found that the ignition delay of emulsion fuel is slightly longer than that of pure diesel, however, the combustion duration is shorter, which further explains why the emulsion fuel can increase the efficiency of the engine. (C) 2013 Elsevier Ltd. All rights reserved.