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Diesel fuel emulsions have been considered for compression ignition engines to enhance the combustion efficiencies and reduce the harmful exhaust emissions. High NOx emission is one of the limiting factors on extended utilization of biodiesel. The presence of water in fuel emulsions can reduce the NOx emissions. The interaction of biodiesel and surfactant concentrations of water-biodiesel-diesel emulsions on diesel engine exhaust emissions are unclear and need investigation. The objective of this study was to determine the effects of biodiesel and surfactant concentrations of a water-biodiesel-diesel nanoemulsion fuel system on engine performance and exhaust emissions of a compression ignition engine. The results showed that biodiesel nanoemulsions reduced the NOx emissions compared to biodiesel blends at the same biodiesel concentrations. Increasing the surfactant concentration at constant water (10%) and biodiesel concentrations produced higher engine powers. However, biodiesel nanoemulsions significantly increased the BSFC compared to the biodiesel-diesel blends and diesel fuels. Biodiesel nanoemulsions reduced the NOx emissions and exhaust temperature but increased the BSFC and CO emissions.