Biodiesel is a promising renewable alternative fuel for diesel. However, its adaptability is limited by its emission levels surpassing the existing emission norms. In this situation, it is essential to search for an economically apt way of reducing the pollutants so as to make biodiesel a viable proposition. Emulsified fuels have more priority in reducing Nitrogen Oxide (NOx) and smoke simultaneously than other fuels. In this study, Thevetia Peruviana biodiesel was emulsified with water in the ratios of 5%, 10%, 15% and 20% to investigate the engine performance and emission characteristics. Emulsified fuels showed an improvement in brake thermal efficiency accompanied by the drastic reduction in NOx. From the detailed study it was found that 15% water emulsified fuel showed the best performance and less emission than the other combinations.