Emulsion fuel is regarded as one of the possible alternative fuels for reducing the emissions of pollutants from combustion systems. In this study, we investigated the effect of droplet size on combustion and emission characteristics for both pure diesel and emulsion fuel. For experimental setup, a burner equipped with a twin fluid atomizer is used. A pilot burner is used to stabilize the flame with diesel fuel/water emulsion. Water percentage of 5 vol% in W/O emulsion fuel was used in this experiment. Smaller fuel droplet SMD that has larger surface to volume ratio will promote better combustion efficiency due to improvement of fuel-air mixture. However, this also will increase the combustion temperature, hence promoting the NO formation. Experiment result shows that smaller fuel droplet SMD had higher NO emission index for both pure diesel and emulsion fuel. However, emulsion fuel combustion shows improvement in NO specific emission. The vaporization of water in emulsion fuel reduced local flame temperature and thus reduced the NO formation. Emulsion fuel also had lower flame luminance as compared with diesel fuel alone. This is caused by lower soot emission of emulsion fuel. With almost same fuel droplet SMD for both sample fuels, we achieved significantly lower NO and soot emission for emulsion fuel.