As the urgency for environmental sustainability escalates globally, the exploration of alternative fuels for diesel engines becomes a crucial endeavor. By combining chemical reaction kinetics and three-dimensional simulation software, the combustion and emission characteristics of a diesel engine fueled with two oxygenated fuels, hydrogenated biodiesel and ethanol, and adopting a multi-stage injection strategy were studied. The combustion mechanism of hydrogenated biodiesel ethanol diesel hybrid fuel was established, and the reaction activity of ester alcohol diesel with different mixing ratios was studied through reaction flow analysis at high and low OH temperatures. The established mechanism was coupled with CFD 2021 three-dimensional simulation software to compare the combustion and emission performance of diesel engines fueled with different ratios of ester alcohol diesel. The results show that as the proportion of ester alcohol mixture increases, at low temperatures, the OH generation rate decreases, the consumption rate increases, and the reaction activity decreases, which is not conducive to the promotion of combustion reaction; at high temperatures, the generation rate of OH increases, the consumption rate decreases, and the reaction activity increases, which is conducive to the promotion of combustion reactions. Compared to diesel, the reaction system activity of mixed fuel is enhanced, and the main peak values of cylinder pressure and instantaneous heat release rate are higher than that of diesel. The diffusion of oil and gas in the cylinder is improved. As the proportion of ester alcohol diesel mixture increases, the oxygen content increases, nitrogen oxides emissions increase compared to diesel, and soot emissions decrease compared to diesel. Soot emissions are mainly distributed in areas with a high equivalence ratio and high temperature, which is consistent with the distribution area of C2H2, the precursor of soot generation.