The aim of experimental investigation is to analyze the change in performance characteristics when Partially Stabilized Zirconia (PSZ) was used as a thermal barrier coating in the combustion chamber, with emulsified fuel. Sorbitan mono elate (span 80) and PEG 20 sorbitan monooleate (tween 80) were used as the surfactants to form an emulsified fuel with diesel and water. Diesel, water and surfactants were taken in a flask; continuous stirring was done at a speed of 1000 rpm. The stability of the emulsified fuel has been checked for 8 hours for separation. It was observed that a remarkable improvement in brake thermal efficiency and specific fuel consumption. The results of the experiment proved that PSZ would be used as a performance improver as it retains the combustion temperature and increases the efficiency to a significant level. © 2017 Published under licence by IOP Publishing Ltd.