The research paper aims to estimate the diesel engine performance and emission characteristics by using pure diesel and biodiesel – ethanol blends with addition of cerium oxide nanoparticles. The stability of pure diesel and diesel-biodiesel-ethanol fuel are analysed with addition of cerium oxide nanoparticles. By engine performance tests, it is noted that blends with high speed in ultrasonic bath stabilization increase the stability. The experiments are conducted in single cylinder four stroke diesel engine coupled with an eddy current dynamometer variable compression ratio engine to estimate performance characteristics. The cerium oxide acts as a catalyst and reduces the emissions like CO, NOx. In this experiments using diesel and biodiesel ethanol blend with additive cerium oxide nanoparticle to progress the combustion of the fuel and reduction of the exhaust emissions.