Premixed charge compression ignition (PCCI) combustion has been shown to be a promising combustion technique to improve the combustion process and simultaneously reduce both Nitrogen oxides (NOx) and particulate matter (PM) emissions. The combination of port dimethyl ether (DME) induction and in-cylinder diesel direct-injection compression ignition (DICI) combustion was studied in a YTR 2105 engine. The main purposes of this paper were to investigate the effects of DME introduction on the combustion and emission characteristics of a diesel engine. Results obtained revealed that PCCI combustion process was composed of the homogeneous charge compression ignition (HCCI) combustion and conventional diffusion combustion. As the DME quantity was increased, the start of combustion (SOC) was advanced. The peak values of in-cylinder pressure and mass averaged temperature increased as well as the maximum heat release rate of DME HCCI combustion. But the maximum heat release rate of diesel diffusion combustion decreased. Meanwhile, the cycle-to-cycle variations of the maximum in-cylinder pressure and IMEP in the DME-diesel engine were higher than those in conventional diesel engine and the coefficient of variation (COV) of maximum in-cylinder pressure and IMEP increased with a rise of DME induction quantity. The equivalent specific fuel consumption decreased with an increase in DME quantity. NOx emission slightly reduced; while smoke and PM missions drastically decreased with a rise of DME induction quantity. PM emission was extremely low at high DME induction quantity.