In this paper, the effect of oxygen component in fuel on the exhaust emissions has been investigated fur direct injection diesel engine. It was tested to estimate change of engine performance and exhaust emission characteristics for the commercial diesel fuel and oxygenated blended fuel which has seven kinds of mixed ratio. And, the effects of exhaust gas recirculation(EGR) on the characteristics of NOx emission have been investigated. Ethylene glycol mono-n-butyl ether(EGBE) contains oxygen component 27% in itself, and it is a kind of effective oxygenated fuel of mono-ether group that the smoke emission and unburned hydrocarbons of EGBE is reduced remarkably compared with commercial diesel fuel, that is, it can supply oxygen component sufficiently at higher loads and speeds in diesel engine. It was found that simultaneous reduction of smoke and NOx was achieved with oxygenated fuel and cooled EGR method.