To improve the combustion and emission characteristics of diesel engines, methanol-diesel fuels with different mixing ratios (DM0, DM10, DM20, DM30, and DM40) were used to investigate the effects of methanol addition on the combustion and emission of a four-stroke diesel engine in terms of cylinder pressure, brake power, brake-specific fuel consumption, and nitrogen oxides, soot, and carbon monoxide emissions. Firstly, an improved entire diesel engine model was developed using AVL-BOOST software and validated by the experimental results. The results showed that the increase of methanol content in the fuel mixture had a negative impact on the performance characteristic of the diesel engine, but significantly improved the emission characteristic of the diesel engine. With the methanol ratio in the mixed fuel increased to 10%, 20%, 30%, and 40%, the cylinder pressure of the engine increased by 0.89%, 1.48%, 2.29%, and 3.17%, respectively. However, the power decreased by 3.76%, 6.74%, 11.35%, and 15.45%, the torque decreased by 3.76%, 6.74%, 11.35%, and 15.45%, respectively, and the brake specific fuel consumption increased by 3.77%, 6.92%, 12.33%, and 17.61%, respectively. In addition, with the methanol ratio in the mixed fuel increased to 10%, 20%, 30%, and 40%, the carbon monoxide emission decreased by 21.32%, 39.04%, 49.81%, and 56.59% and the soot emission decreased by 0.25%, 8.69%, 16.81%, and 25.28%, respectively. Therefore, the addition of methanol to the fuel can improve the combustion and emission characteristics of the engine.