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Out of various strategies to extenuate the diesel engine emissions, use of water-blended diesel fuel in emulsified form is found to be a prominent option. The studies carried out by various researchers give quite inconsistent results for optimum water concentration, surfactant concentration, and HLB value. An effort has been made in this paper to analyze this inconsistency of water concentration and surfactant for engine emissions and performance along with the effect of compression ratio. The work has been carried out on a non-road, constant rpm, VCR (variable compression ratio) diesel engine. Different emulsions of 5%, 10%, 15%, and 20% water-in-diesel with 3% emulsifier concentration were tested on the diesel-optimized engine at CR 21. The results showed that emulsion of 15% water-in-diesel is optimal on the basis of emissions and performance. Further, the selected 15% emulsion is tested with 4% emulsifier concentration. It improved the stability of emulsion and performance of the engine with slight adverse effects on the NOx emissions. Then, emulsion with 4% surfactant and 15% water is tested to determine optimum compression ratio for emulsified fuels. CR 20 is found in optimum. Remarkably 9.28% improvement in BTE is observed reaching up to 23.89% as compared to 21.86% with bare diesel. 25.1% reduction in NOx and more than 50% reduction in smoke is observed. Overall, it is concluded that the water-blended diesel emulsion could serve as a fuel-efficient cleaner combustion technology and needs to be standardized. Abbreviations HLB: Hydrophile–Lipophile Balance; Cv: Calorific Value; W/D: Water in Diesel; PM: Particulate matter; RPM: Rotation per minute; HC: Hydrocarbon; CR: Compression Ratio; EGT: Exhaust Gas Temperature; BTE: Brake Thermal Efficiency; NOx: Oxides of Nitrogen; BSFC: Brake specific fuel consumption [ABSTRACT FROM AUTHOR]