Emulsions have long been considered as an alternative fuel for combustion equipment in order to achieve better fuel economy and pollution reduction. While a mechanical homogenizing method is frequently used to prepare emulsions, the use of an ultrasonic emulsification method to do so is still rather limited, and is mostly applied to two-phase emulsions only. Hence, two-phase W/O and three-phase O/W/O emulsions, prepared by a mechanical homogenizer and an ultrasonic vibrator, respectively, were prepared and used as engine fuel. The emulsion properties, engine performance, and engine emission characteristics between these two emulsification methods were measured and compared. The potential of the ultrasonic emulsification method was also evaluated. The experimental results show that the emulsions prepared by the ultrasonic vibrator appeared to have more favorable emulsification characteristics such as smaller dispersed water droplets that were distributed more uniformly in the continuous oil phase, lower separation rate of water droplets from the continuous phase of diesel fuel and thus a lower separating rate of the dispersed water droplets from the emulsion, larger emulsion stability, and larger emulsion viscosity than the emulsions produced using a mechanical homogenizer. In addition, a larger content of water was emulsified when the emulsion was prepared using the ultrasonic vibrator than the mechanical homogenizer. The emulsions prepared by the ultrasonic vibrator also had a lower fuel consumption rate, lower bsfc, and significantly lower CO emission while at the same time having a larger black smoke opacity. When comparing the two-phase W/O and the three-phase O/W/O emulsions prepared by either the ultrasonic vibrator or the mechanical homogenizer, the two-phase W/O emulsions appeared to have a lower fuel consumption rate, bsfc, CO, and a lower black smoke opacity than the three-phase O/W/O emulsions, regardless of whether they were prepared by ultrasonic vibrator or mechanical homogenizer. (C) 2008 Elsevier Ltd. All rights reserved.