(57) The present invention relates to translucent and thermodynamically stable fuel compositions having improved combustion efficiency and reduced smoke, particulate, CO, and NOx emissions. The fuel compositions comprise, for example, a diesel fuel, water, or an aqueous solution of a low molecular weight alcohol and/or a water-soluble reagent, and a surfactant system which comprises a balanced blend of one or more hydrophilic surfactants and one or more lipophilic surfactants, wherein the diesel fuel composition can contain as high as 30 weight percent of aqueous phase with an aqueous phase/surfactant ratio at least 2/1. The surfactant system may contain, in addition to the hydrophilic and lipophilic surfactants, cosurfactants and polar organic solvents. The reagent solution comprises aqueous solutions of an additive selected from the group consisting of inorganic oxidizing agents, low molecular weight polar organic oxidizing agents, and nitrogen oxide-containing compounds which act as cetane improvers and/or combustion modifiers. These additives offset the well-known loss in cetane number and/or the ignition delay caused by dispersed or microemulsified water and eliminate the need to change engine operating parameters.