Abstract-Biodiesel is consider as a potential alternative fuel for compression ignition engines. These are obtained from various resources. However, the usage of biodiesel blend in high percentages in compression ignition may cause some technical problems because of their higher viscosity, high pour point, and low volatility. Ethanol can be used as a fuel extender to enable the use of the higher percentage of biodiesel in CI engine. Blends of ethanol-animal fat oil biodiesel-diesel were prepared and experimental studies have been carried out. We have found that B40E20 fuel blend (40% biodiesel and 20 % ethanol in diesel) reduces the specific fuel consumption and improves brake thermal efficiency of the engine compared to B40 fuel blend. We observed that fuel characteristics improved considerably with the addition of ethanol to biodiesel. Emissions of CO, HC and smoke reduced while CO 2 emissions were increased due to more complete combustion of the blend.