Biofuels are playing important role in recent decades as substitutes for petro diesel. Biodiesel derived from vegetable oils are found to give comparable performance and emission characteristics. In this paper a comparative study has been done between two fuels combinations i.e., emulsified biodiesel and DEE (Diethyl Ether) blended biodiesel to find the suitable combination of fuel in reducing the emissions and improving the performance of the diesel engine. Experiments have been conducted in a single cylinder diesel engine with biodiesel blended with DEE/Water in the ratios of 5%, 10%, 15% and 20% by volume. The results depicts that 15% emulsified biodiesel shows the highest brake thermal efficiency of 31.6% among all other fuel combinations at full load. Reduction of Nitrogen Oxide (NOx) is observed as 41% for 20% emulsified biodiesel than that of biodiesel at full load whereas only 26% of nitrogen oxide reduction is observed for 20% DEE blended biodiesel. However, the reduction of smoke emission is less for emulsified biodiesel when compared with DEE blend. Reduction in Hydro Carbon (HC) emissions is observed as 3.05% for 20% emulsified biodiesel than in biodiesel at full load whereas 7.7% increase in HC emissions is observed for 20% DEE blend. So it is concluded that the emulsified biodiesel results in better performance and less emissions than that of DEE blended biodiesel.