In the present study, the enhancement of an engine performance and emission characteristics by the addition of nanoparticles to the fuel is presented. In this regard, Aluminum Oxide (Al2O3) Nanoparticles were utilized as fuel additive in a single cylinder, direct injection four stroke diesel engine. Two percentages of 0.1 and 0.5% by weight of Al2O3 were tested and compared to regular diesel fuel. The results showed that nano-sized aluminum oxide can improve the performance of diesel engines and reduce the emission of pollutants like CO2 and HC compared to conventional diesel fuel. Furthermore, the results indicated that the nanofuel with nanoparticle concentration of 0.5 % gives better performance characteristics in comparison with that of 0.1 %.However, the only downside of the nanoparticle addition was the relative increase in CO emissions at low loads.