The use of WDEF (water-diesel-emulsified fuel) has been one of the effective methods used for NOx (Nitrogen oxide) reduction without any modification on engine. In the present study, firstly, the potential of emulsified fuel on performance of engine parameters has been determined. In the experiments; pure diesel, 5%, 10% and 15% water content have been prepared and tested at rated power and torque conditions. As a result of experiments, a slight reduction of up to 5.22% in brake power is observed for maximum torque, also increase up to 7.42% in BSFC (Brake-specific fuel consumption) is attained while using emulsified fuel. However, a leading emission problem of diesel engine, the highest reduction in NOx emissions is obtained as 16.84%. For maximum power, a slight reduction up to 5.46% in brake power has been observed, also increase up to 8.96% in BSFC is acquired comparing with pure diesel. The highest decrease in NOx emissions has been achieved 10.8% by using WDEF. As a result of theoretical study, 10% emulsified fuel has been determined as the optimum fuel blend with the use of Fuzzy-AHP (Analytic hierarchy process) and CODAS (Combinative distance-based assessment) regarding experimental results of brake power, torque, brake specific fuel consumption and NOx emissions. The effects of the optimized fuel on performance of engine parameters and NOx emissions have been examined by one dimensional thermodynamic simulation, AVL Boost, and the results are compared with experimental data. The theoretical results have a good agreement with experimental data.