In recent years, intensive research has been pursued throughout the world in order to find substitutes to crude oil based fuels in compression-ignition engines. Among the different fuels studied, Ethanol is one of the primary candidate to substitute diesel fuel. This paper presents the results from recent work done on the experimental investigation of performance and emission of aquanol in a spark ignited 4-stroke diesel Engine. Since the water content in the ethanol is facilitating the prevention of NOx formation. It is apparent from the pollution point of view that the use of ethanol + water as CI engine fuel is reducing the NOx pollution. In addition the performance improvement also associated with the aquanol. However the percentage of water in the fuel can be increased with the application of thermal barrier coatings, such as PSZ.