The process of building the engine and its subsequent systems involves usage of metals & its compounds. The current technique is in which the fuel is burned in a combustion chamber wherein the actual combustion progression and its subsequent gases are surrounded by metallic compounds. The part of the heat energy generated in the system is forced to be removed by means of cooling to protect the structural integrity of the engine; nearly 30% of the energy is lost due to cooling. However limitation in structural behaviour of metallic materials and limited resource for the production of metals and alloys with superior high temperature structural causes the search for new alternate materials like ceramics, organic synthetic plastic, etc. Thermal Barrier Coating is an attractive and promising method in providing thermal insulation for the engine components due to its good thermo-mechanical properties. Thermal insulation reduces the heat transfer from combustion chamber to the metallic materials thereby reducing the need for cooling and heat energy loss due to the same. On top of that this insulation reduces the rate of heat rejection to the surrounding and catalyses better combustion which ultimately amplifies the efficiency of the engine. This present study has been executed on three cylinder naturally aspirated diesel engine to understand the effect of the ceramic compound coating Yttria-Stabilized Zirconia, on engine performance and emission characteristics. This study compares the performance & emission characteristics of two different configurations namely, Engine Build I (Baseline Engine) and Engine Build II (Ceramic coated on cylinder head (incl. valves) of the Engine). Test results revels, that Ceramic coating on Cylinder head produce a reduction in fuel consumption, delivers higher performance and better emission characteristics.