To tackle the problems associated with the volatility of crude oil prices and ever stringent emission norms, oil industries and automobiles manufacturers are experimenting with various alternative fuels to increase its percentage share in the energy mix and to reduce the vehicular emissions. Alcohols are preferred choice of alternative fuels for the gasoline engines as it does not require any major engine modification and new infrastructure for the fuel distribution network. Ethanol as sole fuel or blending component for gasoline for use in spark ignition engines has been investigated many decades. Currently, 10% ethanol is blended in motor gasoline in India and the ethanol concentration may be further increased in future. In order to study the effect of higher blends of ethanol (upto 20%) on engine in-cylinder combustion, performance and emission, investigations were carried out on a latest generation passenger car engine in a climatic controlled test cell. Engine combustion, performance and emissions were analyzed at full throttle condition at regular speed intervals. Higher octane number and oxygen in the ethanol blends improved the combustion and thereby increased the power and torque marginally. Ethanol blends reduced the specific energy consumption of the engine for the all speeds at full throttle opening. E20 blends decreased CO emission by 65%; HC emission by 38% with the penalty of doubling the NOx emission at rated power condition. Increase in combustion duration was observed with ethanol blends compared to gasoline. Indicated mean effective pressure and maximum peak pressure of the engine were increased with engine speed for the all test fuels and the ethanol blends increased these values marginally. Ethanol as blending component for gasoline improved the combustion and thereby marginally enhanced the engine performance and significantly reduced the exhaust emissions.