The global automotive industry is facing significant challenges, including dwindling fossil fuel reserves, rising crude oil prices, and increasingly strict emission regulations. To address these concerns, this study investigates the impact of the compression ratio (CR) and exhaust gas recirculation (EGR) on the performance and emissions of a common rail direct injection (CRDI) diesel engine fuelled with a 20% blend of tamarind seed methyl ester (TSME 20) biodiesel. The study employed an open-type electronic control unit to implement pilot fuel injection at a rate of 30%, 23° before the top dead centre (TDC), and at a higher pressure of 600 bar. Three CRs (16:1, 18:1, 20:1) and two types of EGR (hot and cold EGR at 10%) were evaluated. Diesel fuel at CR 18 was used as a baseline for comparison. The experimental procedure involved conducting tests with TSME 20 at CR 16, 18, and 20. Subsequently, TSME 20 at CR 20 + Hot EGR 10% and TSME 20 at CR 20 + Cold EGR 10% were examined. The results showed that TSME 20 operated at a higher CR (CR 20) exhibited improved diesel engine performance and significant reductions in harmful exhaust emissions. Additionally, cold EGR at 10% was more effective in reducing CO, CO2, and NOx emissions from TSME 20 than hot EGR. The findings of this study provide valuable insights into optimizing diesel engine operation to achieve a balance between performance enhancement and emission reduction through tamarind seed biodiesel blends and different EGR techniques. The implementation of these strategies holds considerable potential in addressing the automotive industry’s challenges, including ecological considerations and fuel price fluctuations.