In recent years, more efforts have been taken to completely run compression ignition (CI) engines on biofuels. Utilization of biodiesel alcohol blend as an alternative fuel in CI engines offer simultaneous reduction of oxides of nitrogen (NOx) and smoke emissions with a penalty of unburnt hydrocarbon(UHC) emission. Karanja methyl ester(KME) is considered to be one of the potential alternative biodiesels in India. In this study, initially, n-butanol at low proportions viz 5%,10%,15%, and 20% is blended with KME at 95%, 90%, 85% and 80% respectively, and the blends are characterized. The blends are denoted as KBB5, KBB10, KBB15 and KBB20 where the numeric value followed by KBB indicates the percentage of n-butanol in the blends. The blends are used as test fuels in a single cylinder, four-stroke, direct injection(DI) diesel engine producing power of 4.4KW at a constant speed of 1500 rpm. The performance and emission characteristics of the engine are evaluated, compared with the diesel engine operation. Further, an oxygenated additive in small quantities is added with the optimum blend to examine the reduction of UHC emission from the engine, when the engine is run with biodiesel n-butanol blend. The results are presented in this paper.