The present investigation is directed towards synthesis of zinc oxide (ZnO) nanoparticles and steady blending with soybean biodiesel (SBME25) to improve the fuel properties of SBME25 and enhance the overall characteristics of a variable compression ratio diesel engine. The soybean biodiesel (SBME) was prepared using the transesterification reaction. Numerous characterization tests were carried out to ascertain the shape and size of zinc oxide nanoparticles. The synthesized asymmetric ZnO nanoparticles were dispersed in SBME25 at three dosage levels (25, 50, and 75 ppm) with sodium dodecyl benzene sulphonate (SDBS) surfactant using the ultrasonication process. The quantified physicochemical properties of all the fuels blends were in symmetry with the American society for testing and materials (ASTM) standards. Nanofuel blends demonstrated enhanced fuel properties compared with SBME25. The engine was operated at two different compression ratios (18.5 and 21.5) and a comparison was made, and best fuel blend and compression ratio (CR) were selected. Fuel blend SBME25ZnO50 and compression ratio (CR) of 21.5 illustrated an overall enhancement in engine characteristics. For SBME25ZnO50 and CR 21.5 fuel blend, brake thermal efficiency (BTE) increased by 23.2%, brake specific fuel consumption (BSFC) were reduced by 26.66%, and hydrocarbon (HC), CO, smoke, and CO2 emissions were reduced by 32.234%, 28.21% 22.55% and 21.66%, respectively; in addition, the heat release rate (HRR) and mean gas temperature (MGT) improved, and ignition delay (ID) was reduced. In contrast, the NOx emissions increased for all the nanofuel blends due to greater supply of oxygen and increase in the temperature of the combustion chamber. At a CR of 18.5, a similar trend was observed, while the values of engine characteristics were lower compared with CR of 21.5. The properties of nanofuel blend SBME25ZnO50 were in symmetry and comparable to the diesel fuel.