In this report combustion and exhaust emissions with neat diesel fuel and diesel-biodiesel blends have been investigated. In the investigation, firstly biodiesel from non-edible neem oil has been made by esterification. Biodiesel fuel (BDF) is chemically known as mono-alkyl fatty acid ester. It is renewable in nature and is derived from plant oils including vegetable oils. BDF is non-toxic, biodegradable, recycled resource and essentially free from sulfur and carcinogenic benzene. In the second phase of this investigation, experiment has been conducted with neat diesel fuel and diesel-biodiesel blends in a four stroke naturally aspirated (NA) direct injection (DI) diesel engine. Compared with conventional diesel fuel, diesel-biodiesel blends showed lower carbon monoxide (CO), and smoke emissions but higher oxides of nitrogen (NOx) emission. However, compared with the diesel fuel, NOx emission with diesel-biodiesel blends was slightly reduced when EGR was applied.