The use of water-in-diesel emulsion fuel has the potential to significantly reduce the formation of oxides of nitrogen (NOX), particulate matter (PM), and total gaseous hydrocarbons (THC) in diesel engines without engine modification. The preparation of stable water-in-diesel emulsion fuel and its variation in properties is critical for the successful development of diesel engines. The present study was carried out to create a stable water-in-diesel emulsion fuel by analyzing the effects of different process variables on emulsion preparation, including surfactant hydrophilic-lipophilic balance (HLB), water concentration in diesel, and stirrer speed. The stability was analyzed by emulsion fuel density variation as a function of time using a photonic system on the emulsion surface. From the results obtained, it was found that sorbitan monolanrate mixed at maximum stirring speed gave optimal emulsion stability for all concentrations of water. The critical fuel properties (density, viscosity, heating value, flashpoint, and corrosiveness) were measured for stable emulsion fuel and compared to the European Standard of automotive fuel requirements. The results indicate that a concentration of water in excess of 10% failed to meet fuel requirements.