Emulsification technique is one of the most significant approaches to the reduction of pollutant emission of diesel engines. In this research, water-in-oil emulsion of palm biodiesel was prepared by mixing palm biodiesel and water in the presence of emulsifier. For experimental purposes, different types of emulsifiers were screened for their ffectiveness in stabilizing the emulsion system. The results of the experiment showed that the polymeric surfactant was found to be the most suitable emulsifier for palm biodiesel emulsion. It was also found that the stability of the emulsion system was increased by increasing the mixing speed. Even though the preliminary engine test showed significant reduction of nitrogen oxides (NO_x) emission, data from this research also showed that the calorific value of the fuel also decreased with the increase of water content in the formulation.