The performance and emission characteristics of a single-cylinder two-stroke diesel engine fueled with direct injection of natural gas entrained with pilot diesel ignition enhancer have been measured. The thermal efficiency of the optimum gas-diesel operation was shown to exceed that of the conventional diesel at full load, but to be less at part load where the ignition delay was excessive. At high load, where the NOx emission problem is most serious, substantial reduction in NOx emission rate was obtained with delay of injection timing and also with use of exhaust gas recirculation. Measured cylinder pressures were used with a three-zone combustion model to determine ignition delay and the temperatures of the burned gas. The predicted NOx emissions based on equilibrium concentration of NO at the maximum burned gas temperature were found to correlate closely with exhaust pipe measurements of NOx.