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Microalgae is considered as an excellent potential renewable source of fuel in many forms including powder or slurry. A high percentage of emulsified water in the fuel is reported to reduce diesel engines’ emissions such as NO_x, but that will compromise the engine output power. Using microalgae powder as an additive to enhance the emulsified water fuel heating value is the main objective of this work. Diesel engine combustion, vibration, performance and emissions were evaluated for pure cottonseed biodiesel (CS-B100), emulsified water 20% (vol.) in cottonseed biodiesel (CSB-E20) and emulsified water 20% (vol.) containing Fresh Water Microalgae Chlorella Vulgaris (FWM-CV) in cottonseed biodiesel (CSB-ME20). The emulsified water fuels showed a reduction in in-cylinder pressure, vibration, brake power, torque, exhaust gas temperature, CO₂ and NO_x, while BSFC and O₂ were higher than the pure biodiesel (CS-B100). CSB-ME20 produced higher power and torque than CSB-E20 due to the presence of microalgae in the fuel that increased the energy content of the fuel.