The characteristics of combustion and spray, power performance, fuel economy and emission characteristics for emulsified diesel were reviewed, the differences of engine fueled with conventional and emulsified diesel and their causing factors were analyzed, and the application and optimization methods of emulsified diesel in diesel engine were finally summarized. The results showed that the ignition delay and combustion duration period of emulsified diesel delayed and shortened respectively. In addition, spray penetration of emulsified diesel was almost the same as or longer than that of pure diesel and its flame height also increased. The power of diesel engine decreased, but the brake thermal efficiency improved after being fueled with emulsified diesel. The NOx and soot emissions reduced and the HC and CO emissions increased at most operating points, especially at low speed and medium and low load. The total particle number concentration increased, the particle volume fraction decreased and the aldehyde and noise emissions were little influenced. The addition of appropriate additives or the introduction of engine collaborative technology could improve the combustion process of emulsified diesel and hence the low fuel consumption and emission were realized. The fuel design based on fuel stability and physiochemical features and the optimization of combustion parameter for high pressure common rail diesel engine fueled with emulsified diesel would be concerned in the future.