Diesel fuel blends with biodiesels are expected to mitigate the rising price and demand of conventional fuels. Biodiesel fuel blends are also known to reduce engine emissions. Biodiesel is produced from various sources, one of which is Calophyllum Inophyllum methyl ester biodiesel (CIMEBD). Even though it serves to mitigate the energy crisis and has a low overall carbon footprint, CIMEBD has certain negative issues relating to engine performance and emission characteristics. Nanoparticle (NP) addition is known to enhance the engine performance characteristics of next generation biofuels. CeO2 (cerium oxide or ceria) NPs of varying size are used in this study along with 25:75 biodiesel–diesel (BD) blend and a fixed NP concentration of 90 ppm. Ceria NP-doped fuel is shown to have better engine performance compared to diesel and BD blend for all load conditions. Improvements in brake thermal efficiency (BTE) and brake-specific fuel consumption (BSFC) values equal to +30% and −46%, respectively, are observed from experiments for ceria NP-doped biodiesel, compared to diesel–biodiesel (BD) blend. Ceria NPs in the 20 to 40 nm range have optimum engine performance characteristics. Compared to BD blends, NP-doped biodiesel shows improvements in NOx, CO, CO2, UHC, and soot parameters up to −35%, −60%, −35%, −38%, and −40%, respectively. Likewise, the optimum size of ceria NPs is in the range 20–40 nm for better emission characteristics.