Innovative and sustainable solutions are increasingly necessary as concerns about fossil fuels’ environmental and economic impacts grow. Accordingly, this study aims to enhance vehicle internal combustion engine efficiency by producing oxy-hydrogen (HHO) from drain water from the vehicle air conditioning system and utilizing it as a secondary fuel. A 1600 cc Daewoo engine equipped with electronic fuel injection was employed as the test subject. Initially, the engine’s performance was evaluated using various gasoline variants, 80, 92, and 95. The 92-octane gasoline demonstrated the highest efficiency, achieving a peak power of 113 kW and torque of 190 Nm. The engine had an 11:1 compression ratio. Then, different flow rates of oxy-hydrogen, 50, 248, 397, and 480 mL/min, generated from the air conditioner drain were combined with 92 fuel. A significant improvement was observed with the increase in the flow rate of oxy-hydrogen gas to the 92 fuel. The results indicated that incorporating 480 mL/min oxy-hydrogen gas into the fuel led to an 8.7% reduction in fuel consumption, 5.5% enhancement in thermal efficiency, and 7.9% in volumetric efficiency. Greenhouse gas emissions reductions of carbon monoxide, carbon dioxide, and hydrocarbons were recorded as 18%, 9.2%, and 9%, respectively. At the same time, nitrogen oxides increased by 12.5%. Therefore, utilizing a vehicle air conditioner drain water to generate oxy-hydrogen gas fuel in conjunction with 92-octane gasoline is an efficient solution to reduce fuel consumption, enhance energy efficiency, and mitigate the adverse effects of pollution. This approach also contributes to progress towards a more sustainable future.