Methanol production was demonstrated through recycling of Methylosinus trichosporium biomass to curtail time and resources incurred towards recurrent biomass generation. Cumulative methanol titer of 3.6 g/L was achieved after three cycles of biomass reutilization. Methanol was recovered from cultivation medium using distillation attaining a maximum purity of 94.74 %. Different blends of methanol (0–20 % v/v) with diesel were evaluated for their suitability as alternate transportation fuel. Physicochemical properties of diesel-methanol blends either improved or exhibited equivalence relative to pure diesel, as control. The blends were investigated for their effect on emission and performance characteristics of four-stroke compression ignition engine under varying engine loads (25, 50, 75 and 100 %). Brake specific emissions of CO, hydrocarbon and H2S decreased with increasing methanol content in the blend, attaining maximum decrements of 38.8–46.5 %, 39.8–60.7 % and 85.4–87.8 %, respectively, with 20 % methanol-containing blend (M20) under varying engine loads. On the other hand, brake specific NOx emission increased by 27.7–34.8 % under the same conditions. Superior performance parameters e.g., brake specific fuel consumption (0.29 kg kW−1h−1), brake specific energy consumption (12.9 MJ kW−1h−1) and brake thermal efficiency (28 %), were achieved using M20, while mechanical efficiency (80.8 %) exhibited equivalence with pure diesel.