In the present study, the results of an investigation on a Perkins A63544 direct injection diesel engine using water–diesel emulsions (2%, 5%, 8% and 10% water by volume) are reported. The engine was run at different engine speeds ranging from 1400 to 1900 rpm, with steps of 100 rpm, for power and torque analysis. In order to evaluate noise emissions, four engine speeds (1600–1900 rpm with steps of 100 rpm) and four engine load conditions (25%, 50%, 75% and 100%) were selected. No change in engine components and fuel injection systems was made. The statistical analysis results showed that the engine speed and fuel type parameters had significant effects at 1% probability level (P < 0.01) on the average values of the engine power and torque. The engine noise emission was affected significantly (P < 0.01) by the engine speed, fuel type and engine load parameters. The results showed that adding small amounts of water, 2%, to neat diesel fuel produced a significant increase in the engine power. Furthermore, its engine torque and noise emission were comparable with those of neat diesel fuel. The higher water addition to diesel decreased the engine power and torque, however no such change was found for the engine noise emission. The significant increase in the engine power and comparable engine torque and noise emission for 2% water content showed a good potential for this emulsion to be considered as an appropriate alternative to neat diesel fuel.