“Drop-in” biofuels have a high potential as an alternative to petro-fuels. Because drop-in biofuels are hydrocarbon fuel, there are no issues related to poor oxidation stability such as in FAME. Diesel fuel which is named “SoladieselRD” is liquid bio-hydrocarbon and is the hydro-treated oil of micro-algal triglyceride. In this study, the engine performance and exhaust emission characteristics using SoladieselRD were investigated and compared with those using petro-diesel fuel (gas oil). A test was conducted using a single-cylinder, water-cooled, direct-injection diesel engine with a common-rail type high-pressure injection system. From the experimental results, it was clear that the ignition delay of SoladieselRD is shorter than that of petro-diesel, and the trade-off relationship between PM and NOx emissions by SoladieselRD was better than that of gas oil. Therefore, it was concluded that SoladieselRD has a high potential for simultaneously reducing exhaust gas emissions, combustion noise, and specific fuel consumption.