Methyl esters were prepared from the mixture of unrefined palm oil (URPO) and D-Limonene oil (DLO) and evaluated for their properties to be used as fuel in a diesel engine. DLO was blended with URPO in different proportions (such as 10%, 15% and 20% by mass) before transesterification to reduce viscosity of the URPO. 15% of DLO and 85% of URPO by mass was found as the optimum based on the optimum yield. Reaction influential factors, such as amount of alcohol, temperature for reaction, reaction time and amount of catalyst have been investigated for the methyl ester of 15% of DLO and 85% of URPO mixture (PODLO15). In the second phase of work, tests were conducted on a single cylinder, air cooled diesel to analyze the performance, emission and combustion characteristics of the methyl ester of PODLO15. Engine tests results indicated reduced brake thermal efficiency with neat URPO as compared to neat diesel. Methyl ester of PODLO15 showed improvement in brake thermal efficiency. Specific hydrocarbon and carbon monoxide emissions were significantly reduced with the methyl ester of PODLO15 as compared to neat URPO. Nitric oxide emission was found higher with the methyl ester of PODLO15 as compared to neat URPO. Increased peak pressure and reduced ignition delay were observed with the methyl ester of PODLO15 as compared to neat URPO. Heat release pattern showed improvement in the premixed combustion phase with the methyl ester of PODLO15 as compared to neat URPO.