Dual fuel combustion strategy with di-methl ether (DME) and gasoline was tested in a compression ignition engine. Characteristics of combustion and emissions were analyzed with the variation of engine operating parameters such as fuel proportion, DME injection timing, intake oxygen concentration, DME injection pressure and so forth. Gasoline was injected into the intake manifold to form the homogeneous mixture with intake charge and DME was injected directly into the cylinder at the late compression stroke to ignite the homogeneous gasoline-air mixture. Dual fuel combustion strategy was advantageous in achievement of higher thermal efficiency and low NOx emission compared with DME single fuel combustion. Higher thermal efficiency was attributed to the lower heat tranfer loss from the decreased combustion temperature since the amount of lean premixed combustion was increased with the larger amount of gasoline proportion. Lower NOx emissions were also possible by lowering the combustion temperature.