Primary energy source such as fossil fuel keep decreasing due to various kind of usage. According to less amount of the fossil fuel, human seeks for an alternative fuel source such as alcohol. Alcohol like ethanol can be produced easily from strarchy plant. But using alcohol as blended fuel with diesel fuel doesn't work well because alcohol has low cetane number, lack of lubricity and very low miscibility with diesel fuel. To overcome this, fumigation system or port fuel injection of alcohol seems interesting. Although it requires more complicate system but it can compensate the miscibility issue and alcohol can be used in higher dose to give more energy. Diesel engine produces a lot of emission such as NOx and some other carbon content emission like HC, CO and soot due to they run in lean condition as their characteristic. Modern diesel engines are now coupled with exhaust gas recirculation system to help reduce in main emission like NOx. But recirculating an exhaust into combustion system will produce emission like HC and other carbon content emission more. Due to EGR will retard the pressure and the temperature of the combustion, lower work is provided. Alcohol requires heat to vaporize itself to become more radical before associating with other atoms and going into combustion process. So heat from the exhaust gas in EGR could be helpful for alcohol fumigation system by treating combustion process to produce better performance and emission. The result would be observed by conducting an experiment on a single cylinder diesel-direct injection engine, with EGR modification and ethanol fumigation system. The portion of ethanol would be varied in the different increment and the effect of EGR would be observed in the view point of performance, emission and combustion characteristics.