This article discusses the potential of bio-dimethyl ether ͑DME͒ as a promising fuel for India in the transportation sector where a majority of imported petroleum in the form of diesel is used. Specifically, the suitability of DME in terms of its properties vis-à-vis those of diesel, ability to liquefy DME at low pressures similar to liquefied petroleum gas ͑LPG͒, and ease of production from renewable feedstock ͑biomass͒, and most importantly, very low emissions including near-zero soot levels are some of the features that make it an attractive option. A detailed review presents the state-of-the-art on various aspects such as estimates of potential bio-DME production, methods of synthesis of bio-DME, important physicochemical properties, fuelinjection system-related concerns ͑both conventional and common-rail system͒, fuel spray characteristics which have a direct bearing on the engine performance, and finally, exhaust emissions. Future research directions covering all aspects from production to utilization are summarized