This study evaluates the use of biodiesel as an alternative fuel for diesel engines. The fuel properties, performance, emission characteristics and combustion characteristics of a four-stroke, four-cylinder water cooled, direct injection (DI) diesel engine operated on biodiesel, 20% biodiesel,30% biodiesel and 50% biodiesel blended fuels were measured. Results related to the direct use of biodiesel as a diesel engine fuel indicate that this is possible but not preferable because of its high viscosity and cetane number. Biodiesel could be used in the blends with diesel fuel, because most of the measured properties of the biodiesel-diesel blended fuels were close to those of the diesel fuel. It was found that the performance parameters of the biodiesel-diesel blended fuels did not differ greatly from those of diesel fuel. A slight power decrease, with an increase in brake specific fuel consumption (BSFC), was noticed with the blend fuels. Smoke emissions were reduced for the blends while NOx was increased remarkably for the biodiesel-blended fuels. It is consequently argued that biodiesel appears to offer a potential alternative “greener” energy substitute for fossil fuel.