This study focused on the effects of the $CO_2$ gas concentration in fresh charge and induction air temperature on the combustion characteristics of homogeneous charge compression ignition with dimethyl ether (DME) fuel, which was injected at the intake port. Because of adding $CO_2$ in fresh charge, start of auto-ignition was retarded and bum duration became longer. Indicated combustion efficiency and exhaust gas emission were found to be worse due to the incomplete combustion. Partial burn was observed at the high concentration of $CO_2$ in fresh charge with low temperature of induction air. However, indicated thermal efficiency was improved due to increased expansion work by late ignition and prolonged bum duration. Start of auto-ignition timing was advanced with negligible change of burn duration, as induction air temperature increased. Burn duration was mainly affected by oxygen mole concentration in induction mixture. Bum duration was increased, as oxygen mole concentration was decreased.