In this study, biofuel, diesel and ethanol blends (BDEB) were tested in a single cylinder direct-injection diesel engine to investigate the engine combustion, performance and emission characteristics of the engine under five engine loads at the speed of 1500 rpm. Here the ethanol is used as an additive to enhance the engine combustion. The mixture of Commercial diesel fuel, biofuel from Cashew Nut Shell Liquid (CNSL) and ethanol mixture called BDEB is used to run the direct injection diesel engine. The different combination of BDEB asBDEB 5 (Diesel75%,Cnsl 20% and Ethanol 5%) , BDEB 10 (Diesel70%,Cnsl 20% and Ethanol 10%) and BDEB 15(Diesel65%,Cnsl 20% and Ethanol 15%), were tested in the engine. The results are compared with neat diesel fuel. The results showed that the addition of ethanol with bio-fuel and diesel enhance the engine combustion. The engine performance and emission is improved with 15% ethanol in biofuel (BDEB15). Theexperimental results showed that the CO, HC emission is decreased and NOx emission is increased. The brake thermal efficiency, exhaust gas temperature, brakes specific fuel consumption increased for BDEB15 compared to other combination of fuel.