Transit signal priority has a positive effect on improving traffic congestion and reducing transit delay and also has an influence on traffic emission. In this paper, an optimal transit signal priority scheme based on an improved algebraic method was developed and its impact on vehicle emission was evaluated as well. The improved algebraic method was proposed on the basis of classical algebraic method and has improvements in three aspects. First, the calculation rules of split loss are more reasonable. Second, the delay caused by transit stations and queued vehicles can be considered. Third, measures for finding optimal ideal intersection interval are improved. By establishing a microscopic traffic emission simulation platform based on microscopic traffic simulation model VISSIM and the comprehensive modal emission model (CMEM), the traffic emissions can be evaluated. Then, an optimal transit signal priority scheme based on the traffic data collected in Changzhou city was developed and its impact on emission was simulated in the VISSIM-CMEM platform. Comparative analysis results showed that proposed scheme can outperform original scheme in the aspects of reducing emission and passenger delay and an average reduction of 25.0% on transit emission and relative decrease in overall traffic emission can be achieved.