This paper aims at studying the effect of oxygen enriched combustion on performance, emission and combustion characteristics of a diesel engine using the blend of Pyro oil obtained from pyrolysis of cashew nut shell and conventional diesel as fuel. A single cylinder water-cooled, diesel engine was used. The intake system of the engine was modified to accommodate excess oxygen in the incoming air. A separate oxygen cylinder was used for storing pure oxygen and supplying it along with intake air. Base line data was generated using diesel as fuel. Subsequently experiments were repeated with the blend of 40% of Cashew nut shell oil and 60% diesel by volume (called CSO40D60) at different oxygen concentrations such as 21%, 22% 23%, 24% and 25%. Engine performance, emission and combustion parameters were obtained at different power outputs and analyzed. At ambient oxygen condition (i.e. 21%) the test results showed reduced brake thermal efficiency, higher smoke, hydrocarbon and carbon monoxide emissions with CSO40D60 as compared to neat diesel at all power outputs. The brake thermal efficiency was found as 29.5% with CSO40D60 for 21% oxygen where as it was 30.5% with BD (base diesel) at the rated power output of 3.7 kW. The smoke emission was noted as 50% and 40% respectively with CSO40D60 and BD respectively at peak power output. However, there is an improvement in brake thermal efficiency with the oxygen enrichment technique. The brake thermal efficiency was found as 30.5%, 32.6%, 33.2% and 33.1% respectively for 22%, 23%, 24% and 25% of oxygen enrichment at 100% power output. The smoke emission was considerably reduced with oxygen enrichment using CSO40D60 as fuel. Hydrocarbon and carbon monoxide emissions were considerably reduced with all concentrations of oxygen in the intake air. However, NOx emission increased to high levels with increase in oxygen percentage in the air using CSO40D60 as fuel. Cylinder peak pressure of CSO40D60 was measured as higher with oxygen enrichment as compared to atmospheric oxygen concentration at all power outputs. Reduction in combustion duration and improvement in heat release rates were observed for CSO40D60 with all oxygen enrichments. It was concluded that oxygen enrichment technique can be adopted for reducing smoke, hydrocarbon and carbon monoxide emissions of a diesel engine fuelled with CSO40D60 as fuel. The optimum concentration of 24% of oxygen can be preferred in order to avoid over heating of the combustion chamber parts and without having very high values of NOx emissions at peak power output.