In this study, the combustion and exhaust emission characteristics of a single‐cylinder, water‐cooled, four‐stroke VCR engine at a fixed CR were evaluated using DME and diesel with timed manifold injections of 2, 3, 4, and 5 ms for DME and conventional diesel settings. The investigational trials showed that DME has the capability to reduce NOx and OP while used in an optimized range and to have clean combustion characteristics. Induction of DME under low to medium load conditions resulted in a reduction in NOx, OP, and BTE with an increase in HC, whereas at higher load settings, NOx increased with an increase in diesel energy share. The dual fuel combustion was characterized by a short ignition delay, an early start of combustion, and increased in‐cylinder pressure due to the increased compression work input during the cycle. The absence of carbon–carbon bonds in DME molecules caused low soot emissions during dual fuel combustion. After experimentation, RSM was applied to the results for parametric optimization and found to be a useful tool for reducing the error as well as minimizing the number of trials. The optimum settings were achieved at 2 kW load and 4 ms duration, where the desirability function reached a value of 0.94189. The regression equations developed by the model were validated by 9 random experiments, and the error is found to be acceptable. The engine should be operated at medium load to control NOx, and the DME energy share should be low and near 50%.