Ecofriendly ionic liquids (ILs) were synthesized through amidation of ricinoleic acid, the main fatty acid in castor oil, followed by a quaternization reaction to solubilize ethanol in IL/diesel blends at different ratios. As a result, stable and highly renewable, low viscous microemulsion biofuels with high oxygen content were prepared. The prepared fuel samples combine the advantages of green ionic liquids and microemulsion properties. The chemical structures of ILs were confirmed with the aid of NMR and FTIR spectroscopy. DLS analysis revealed that the ethanol particles ranged in size from 8 to 18.1 nm in all samples. As ILs ratios decrease in microemulsion from 37 to 69%, the ethanol particle sizes increase from 10 to 25%. Ethanol shows good solubilization in diesel and IL-1 is more effective than IL-2 in ethanol solubilization at low percentages of ethanol due to more oxygen atoms besides three hydroxyl groups. The ternary phase diagram indicated that the microemulsion area in the case of using IL-1 is larger than that of IL-2. The fuel properties of the prepared microemulsions are nearly close to those of neat diesel and fall within the permitted range of ASTM D975. The viscosity and density values at low ratios of ILs are found to be very close to the values of the neat diesel at different temperatures. The prepared samples show a slight decrease in cetane number and heating value compared to diesel. However, they have improved flash points, cloud points, sulfur content, and acid value. The particle sizes were checked every week and the prepared samples showed high stability with the aid of the synthesized ILs. Moreover, the prepared microemulsions stayed in a transparent appearance for more than a year and no phase separation was observed.