Ultrasonic emulsification of oil and water was carried out and the effect of position of the ultrasound source from the interface on emulsion quality was studied using ultrasonic bath and horn. Correlations for the effect of distance of the ultrasound source from the interface on various emulsion properties such as dispersed phase fraction, droplet diameter were developed. Large variation in the emulsion properties with small changes in the position of ultrasound source was observed and correlated with an exponential type of equation. Discrepancies in the results of heterogeneous liquid phase systems reported in the literature were attributed to the small changes in the location of ultrasound source. Severe attenuation of ultrasound intensity by the oil layer was quantitatively established using decomposition of aqueous KI solution as a model reaction. The droplet diameter was predicted using Kolmogorov eddy length model. The collapse pressure developed in cavitation was determined indirectly and compares favorably with the reported values. The highly localised nature of cavitation phenomenon is also well established as a cause for the variation in the emulsion quality.