This paper aims to develop a new microemulsions system comprising diesel and palm oil methyl ester (PME) that have the potential to be used as alternative fuels for diesel engines. The water-in-diesel-biodiesel microemulsions were prepared by applying PME mixed with diesel, non-ionic surfactants, co-surfactants and water to make the water-in-oil (W/O) microemulsion system. This microemulsified fuel was achieved through low-energy microemulsification by using the constant composition method. The diesel used was mixed with four different concentrations of PME, i.e., 10% (w/w) (B10), 20% (w/w) (B20), 30% (w/w) (B30) and neat diesel (B0). The amount of water was fixed at 20% (w/w). The phase behavior of the water/mixed non-ionic surfactant/diesel-PME system were studied by constructing pseudoternary phase diagrams with the goal of formulating optimized systems. The results showed that the microemulsions were formed and stabilized with a mixture of non-ionic surfactants at a weight ratio of 80:20 at 20% (w/w), and with mixed co-surfactants at a weight ratio of 25:75, 20:80 and 10:90 for B0, B10, B20 and B30 respectively. The particle size, kinematic viscosity at 40°C, refractive index, density, heating value, cloud point, pour point and flash point of the selected water-in-diesel microemulsion were 19.40 nm (polydispersity of 0.12), 2.86 mm /s, 1.435, 0.8913 g/mL, 31.87 MJ/kg, 7.15°C, 10.5°C and 46.5°C respectively. The corresponding values of the water-in-diesel-PME selected were 20.72 nm to 23.74 nm, 13.02 mm /s to 13.29 mm /s, 1.442, 0.8939 g/mL to 0.8990 g/mL, 31.45 MJ/kg to 27.34 MJ/kg, 7.2°C to 6.8°C, 8.5°C to 1.5°C and 47.5°C to 52.0°C. These preliminary findings were further studied as potential fuels for diesel engines.