Biodiesel was prepared from the crude karanja oil followed by the trans-esterification process of the oil with methanol in the presence of KOH as catalyst. The molecular weight of the crude oil was determined and found to be 892.8. Both the acid as well as alkaline esterification was subsequently performed to get the final product. Maximum yield of 88% was achieved at 8:1 molar ratio for acid esterification and 9:1 molar ratio for alkaline esterification, 0.5wt% catalyst KOH using mechanical stirrer. Important fuel properties of methyl esters of biodiesel produced from karanja oil like viscosity, flash point, fire point, calorific value and ash content was found out and compared to the properties. An experimental investigation was made to evaluate the performance, emission and combustion characteristics of a diesel engine using different blends of methyl ester of karanja with mineral diesel. Karanja methyl ester was blended with diesel in proportions of 10%, 20%, 30%, 40% and 50% by mass and studied under various load conditions in a compression ignition (diesel) engine.