This research evaluates the feasibility of using eucalyptus oil blended with conventional diesel fuel in diesel engines. Eucalyptus globulus is one of the main tree species cultivated for paper pulp in western European countries such as Portugal, and eucalyptus oil is one of the byproducts that so far has not been sufficiently evaluated as a biofuel. This study assesses the impact of using this additive on engine performance parameters and emissions as a means to contribute to reducing fossil fuel consumption and pollutant and greenhouse gas (GHG) emissions. The analysis revealed that the addition of eucalyptus oil had a positive effect on torque, a critical performance parameter, with biofuel blends showing consistent torque increases at lower engine speeds. However, torque tended to decrease towards the higher range of engine speed for eucalyptus oil–diesel blends. Several blends showed lower brake specific fuel consumption compared to regular diesel at high engine loads and low engine speeds. Brake thermal efficiency did not vary substantially at lower engine speeds and loads but decreased at higher speeds and loads. Pollutant emissions, particularly unburned hydrocarbons and nitrogen oxides, were influenced by fuel composition, with biofuel blends showing both increases and decreases compared to diesel. It is noteworthy that eucalyptus oil blends exhibited up to a 60% reduction in smoke opacity under specific operating conditions at low speed and high load for 10% incorporation (10EU90D), suggesting that in addition to the already positive effects of cutting down fossil CO2 emissions in proportion to the substitution of fossil diesel with nearly carbon-neutral eucalyptus oil, more environmental benefits may be expected from the incorporation of this product. Although the present economic viability of using eucalyptus oil as a biofuel is still not guaranteed, the present study seems to reinforce its technical viability. Future prospects for the improvement of oil yield through biotechnology, the economic interest of this product for several countries, and the updating and upscaling industrial processes may allow the viability of this biofuel to remain a possibility in the future