The invention provides an emulsion fuel usable as the fuel to be combusted in internal combustion engines under proper combustion conditions. The invention relates to an emulsion fuel obtained by incorporating a slight amount of air into a mixed fluid comprising a fuel oil as the continuous phase and water as the dispersed phase. Since the fine air bubbles thus reduced in buoyancy is hydrophobic,the air bubbles do not adhere to the surfaces of water droplets but are dispersed in the fuel oil to increase the gas-liquid interfacial area (combustion surface area) and to exert surface activity (similar to the function of a surfactant) through electrostatic polarization, thus preventing the fine water droplets from coalescence to stabilize the water droplets in the emulsion fuel. Thus, the water droplets in the emulsion fuel have uniform diameters of narrow distribution, so that the emulsion fuel attains high combustion efficiency when burnt in combustion equipment or the like and is freed from the disadvantage that soot or black smoke is generated.