Abstract Experimental investigation of the combustion of an air-dried Victorian brown coal in O 2/N 2 and O 2/CO 2 mixtures was conducted in a lab-scale drop-tube furnace (DTF). In situ diagnostics of coal burning transient phenomena were carried out with the use of high-speed camera and two-colour pyrometer for photographic observation and particle temperature measurement, respectively. The results indicate that the use of CO 2 in place of N 2 affected brown coal combustion behaviour through both its physical influence and chemical interaction with char. Distinct changes in coal pyrolysis behaviour, ignition extent, and the temperatures of volatile flame and burning char particles were observed. The large specific heat capacity of CO 2 relative to N 2 is the principal factor affecting brown coal combustion, which greatly quenched the ignition of individual coal particles. As a result, a high O 2 fraction of at least 30% in CO 2 is required to match air. Moreover, due to the accumulation of unburnt volatiles in the coal particle vicinity, coal ignition in O 2/CO 2 occurred as a form of volatile cloud rather than individual particles that occurred in air. The temperatures of volatile flame and char particles were reduced by CO 2 quenching throughout coal oxidation. Nevertheless, this negative factor was greatly offset by char-CO 2 gasification reaction which even occurred rapidly during coal pyrolysis. Up to 25% of the nascent char may undergo gasification to yield extra CO to improve the reactivity of local fuel/O 2 mixture. The subsequent homogeneous oxidation of CO released extra heat for the oxidation of both volatiles and char. As a result, the optical intensity of volatile flame in ∼27% O 2 in CO 2 was raised to a level twice that in air at the furnace temperature of 1273 K. Similar temperatures were achieved for burning char particles in 27% O 2/73% CO 2 and air. As this O 2/CO 2 ratio is lower than that for bituminous coal, 30–35%, a low consumption of O 2 is desirable for the oxy-firing of Victorian brown coal. Nevertheless, the distinct emission of volatile cloud and formation of strong reducing gas environment on char surface may affect radiative heat transfer and ash formation, which should be cautioned during the oxy-fuel combustion of Victorian brown coal.