The effect of fuel constituents and exhaust gas recirculation (EGR) on combustion characteristics, fuel efficiency and emissions of a direct injection diesel engine fueled with diesel-dimethoxymethane (DMM) blends was investigated experimentally. Three diesel-DMM blended fuels containing 20%, 30% and 50% by volume fraction of DMM, corresponding to 8.5%, 12.7% and 21.1% by mass of oxygen in the blends, were used. By the use of DMM, it is observed that CO and smoke emissions as well as the total number and mass concentration of particulate reduce significantly, while HC emissions and particulate number with lower geometric mean diameters (Di < 0.039 μm) increase slightly. For each fuel, there is an increase of ignition delay whereas a decrease of cylinder pressure and heat release rate in the premixed combustion phase when the diesel engine was operated with EGR system. The brake thermal efficiency fluctuates at small EGR ratio, while decreases with the further increase of EGR ratio. With an increase of EGR ratio, NOx emission is reduced at the cost of increased smoke, HC and CO emissions as well as the total number and mass of particulates for each fuel.