This study was carried out on a diesel engine operated in dual fuel mode by introducing biogas in the intake air stream. Cerium oxide (CeO2) nanoparticles in varying concentrations were used as diesel additive. Performance and emission tests were carried out to evaluate the effects of five input parameters, namely, CeO2 concentration, torque, biogas flow rate, methane fraction of biogas, and intake temperature. Taguchi’s method was adopted to reduce the number of experimental trials. Signal-to-noise ratio variations were studied and analysis of variance was carried out to obtain the optimum combination of operating parameters and their contributions towards the performance and emission indices. Results showed that low biogas flow rates ensure better thermal and volumetric efficiency and low HC and CO emissions. High biogas flow rates provide significant reduction in diesel consumption and NOx emissions. Increasing the methane content of biogas lowers diesel consumption and emissions of HC and CO. Adding 25 mg/L of CeO2 to diesel improves brake thermal efficiency and lowers all emissions. While manifold heating improves brake thermal efficiency, low intake temperature is preferred from the standpoint of volumetric efficiency and emissions.