To investigate the effects of fuel temperature on the injection process in the fuel-injection pipe and the combustion characteristics of compression ignition (CI) engine, tests on a four stroke, direct injection dimethyl ether (DME) engine were conducted. Experimental results show that as the fuel temperature increases from 20 to 40 °C, the sound speed is decreased by 12.2%, the peak line pressure at pump and nozzle sides are decreased by 7.2% and 5.6%, respectively. Meanwhile, the injection timing is retarded by 2.2 °CA and the injection duration is extended by 0.8 °CA. Accordingly, the ignition delay and the combustion duration are extended by 0.7 °CA and 4.0 °CA, respectively. The cylinder peak pressure is decreased by 5.4%. As a result, the effective thermal efficiency is decreased, especially for temperature above 40 °C. Before beginning an experiment, the fuel properties of DME, including the density, the bulk modulus, and the sound speed were calculated by “ThermoData.” The calculated result of sound speed is consistent with the experimental results.