The global warming crisis and strict regulations have pushed the automotive industry into technological change, but it will take time, so finding quick solutions can be very helpful. Using water in diesel emulsion is one of the low-cost and fast solutions to reduce pollution and improve the performance of diesel engines. In this study, the effects of adding water to diesel fuel and the phenomena that occur when water enters the combustion chamber are investigated. For this purpose, a simulation of a four-cylinder diesel engine has been used with different content of water in diesel (0% or pure diesel, 5%, 10%, 15%, and 20%). The simulations are performed in Converge CFD using dynamic mesh and adaptive mesh refinement. The results showed that the use of water in diesel leads to an improvement of about 10% in engine indicated power and a simultaneous reduction in soot and NOx by 10 and 30%, respectively. The simulation results showed that water droplet micro-explosions accelerated the fuel droplet breakup process and reduced the combustion duration by 10%–30%.