This research investigates the effects of the addition of Fe2O3 and Al2O3 nanoparticles (30, 60, and 90 ppm) and Fe2O3-Al2O3 hybrid nanoparticles to pure diesel fuel on the combustion, performance and emission characteristics of a diesel engine. The results indicated that fuel blends improved the combustion (in-cylinder pressure and heat release rate), performance (power, fuel consumption, and thermal and exergy efficiency), and emission characteristics of the engine. The results showed that the peak combustion pressure increased by 4% and the heat release rate was improved by 15% in comparison with pure diesel with the addition of the nanoparticles. Moreover, the rate of pressure rise increased by 18% compared to pure diesel with nanoparticle additives. Based on the results, the effects of Fe2O3 fuel blends on brake power, BTE, and CO emission were more than Al2O3 fuel blends, such that it increased power and thermal efficiency by 7.40 and 14%, respectively, and reduced CO emissions by 21.2%; moreover, the blends with Al2O3 nanoparticle additives in comparison with Fe2O3 nanoparticle blends showed a better performance in reducing BSFC (9%), NOx (23.9%), and SO2 (23.4%) emissions. Overall, the Fe2O3-Al2O3 hybrid fuel blend is the best alternative if the performance and emission characteristics of the engine are both considered.