The in-cylinder pressure oscillations of a homogeneous charge compression ignition (HCCI)-DI engine fueled with dimethyl ether (DME) have been investigated using discrete wavelet transform (DWT) based on four different wavelet functions. The in-cylinder pressure is decomposed into three levels that contain three details D1, D2, and D3, and an approximation A1. In normal combustion, there are no obvious pressure impacts in three details due to smooth combustion process. The abnormal pressure oscillations occur in three details in knocking combustion, and the oscillation is most intense in D1. Its frequency band 5–10 kHz is the knock frequency band, and most high-frequency pressure oscillations and wavelet energy are in this frequency band. The pressure oscillations are located in the premixed combustion stage and diffusion combustion stage. Characteristics of in-cylinder pressure oscillations can be extracted using four wavelet functions “db4,” “db8,” “sym4,” and “sym8.” Extract abilities of four wavelet functions are different and wavelet db4 is suitable for pressure oscillation detection.