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An experimental study was conducted to determine combustion and exhaust emissions characteristics in an automotive direct-injection diesel engine dual-fueled with natural gas with the objective of improving exhaust emissions and thermal efficiency. Dual-fuel operation can yield a high thermal efficiency almost comparable to the diesel operation and very low smoke at higher loads. However, NOx cannot be reduced by dual-fueling. On the other hand, at lower loads, a dual-fueled engine inevitably suffers from lower thermal efficiency and higher unburned fuel. To resolve these problems, the effects of exhaust gas recirculation (EGR) were investigated. The results show that in dual-fuel operation, hot EGR can improve thermal efficiency and reduce unburned fuel emission at lower loads, While cooled EGR can considerably reduce NOx at higher loads. A Pt oxidation catalyst can be used for additional reduction in unburned fuel emitted due to dual-fueling.