Abstract Search for renewable fuels such as vegetable oils and alcohols (ethanol and methanol) has become pertinent in the context of fossil fuel crisis and vehicle population explosion. The drawbacks associated with vegetable oils (high viscosity and low volatility) and alcohols (low cetane number) for use in diesel engines call for a hot combustion chamber, with its significant characteristics of higher operating temperature, maximum heat release, higher brake thermal efficiency and ability to handle the lower calorific value fuel. Investigations were carried out to evaluate the performance of a direct injection compression ignition engine with high grade low heat rejection (LHR) combustion chamber consisting of air gap insulated piston with 3 mm air gap with superni (an alloy of nickel) crown, air gap insulated liner with superni insert and ceramic coated cylinder head fueled with crude jatropha oil and carbureted alcohol (ethanol/methanol) with varied injection timings and injector opening pressures. Carbureted alcohol was inducted into the engine through a variable jet carburetor, installed at the inlet manifold of the engine at different percentages of crude vegetable oil at full load operation on mass basis. Comparative studies were made with engine with LHR combustion chamber with data of conventional engine with test fuels of diesel, crude vegetable oil and carbureted alcohol at recommended injection timing and optimized injection timing. Comparative studies were also made with methanol operation with data of ethanol operation on both versions of the combustion chamber with different operating conditions. Performance parameters, exhaust emissions and combustion characteristics were determined at full load operation of the engine with varied injection timings and injector opening pressures. Aldehydes were measured by the dinitrophenyl hydrazine (DNPH) method. Combustion diagnosis was carried out with a miniature piezoelectric pressure transducer, top dead center (TDC) encoder and special pressure–crank angle software package. The optimum injection timing was observed to be 32° bTDC with conventional engine while it was 29° bTDC for insulated engine with vegetable oil operation. The maximum induction of alcohol (methanol/ethanol) in conventional engine was found to be 35%, while it was 60% for the engine with LHR combustion chamber at recommended injection timing (27° bTDC). However, the maximum induction of alcohol was observed to be 55% with engine with LHR combustion chamber at its optimum injection timing. With maximum induction of methanol, at an injector opening pressure of 190 bar, engine with LHR combustion chamber at its optimum injection timing increased peak brake thermal efficiency by 3%; at full load operation brake specific energy consumption comparable, decreased exhaust gas temperature by 3%, decreased coolant load by 6%, volumetric efficiency comparable, increased formaldehyde levels by 30%, decreased acetaldehyde levels by 35%, decreased particulate emissions by 20%, decreased nitrogen oxide levels by 14%, increased peak pressures by 3% and maximum rate of pressure rose by 3%, when compared with ethanol operation on engine with LHR combustion chamber at its optimum injection timing.