Abstract: An emulsified biofuel composition comprising: (A) a continuous phase comprising about 50-95 wt % of at least one liquid oil of vegetable or animal origin or mixtures thereof; (B) a water-containing dispersed phase comprising about 1-50 wt % water; (C) about 1-25 wt % of hydroxyl-containing organic compound selected from the group consisting of mono-, di-, tri- and polyhydric alcohols, provided that when a monohydric alcohol is used there is also present at least one of tert-butyl alcohol, at least one C2-C4 alkylene glycol or a mixture of both; (D) about 0.05-10 wt % of at least one emulsifier; wherein the dispersed water-containing droplets have an average particle size of less than about 20 microns. The biofuel is prepared from these components by mixing under high shear conditions, preferably with ultrasonic energy. The emulsifier(s) preferably exhibit a hydrophilic-lipophilic balance of about 8.