The utilization of spark induced compression ignition (SICI) is a proven method to extend the operation load range, improve thermal efficiency as well as ensure robust control of the combustion process of homogeneous charge compression ignition (HCCI). However, negative valve overlap (NVO), intake-charge heating, and other methods of achieving SICI and the knock occurrence limit its load range and industrialization. In this paper, the effects of ethanol blending with different excess air ratios (λ) on the knock and combustion characteristics, output power, indicated thermal efficiency (ITE), and emissions were investigated in a high compression ratio (CR), single-cylinder, four-stroke SICI engine. The experimental results show that weak stratification increases the knock intensity, while strong stratification suppresses knock tendency at the stoichiometric ratio. Ethanol addition can suppress knock tendency, reduce the randomness of knock and improve the combustion stability. In comparison with pure gasoline, the IMEP and ITE of E100 increase by 6.3–15.1% and 6.8–9.1% at different λ, respectively. For conditions with low ethanol blending ratio (such as 0% or 10%) and λ with 1.0 or 1.2, knock is the limitation to further improve its thermal efficiency, while fuel economy is more affected by the overall combustion phase with an increase in ethanol blending ratio and λ. There exists a non-monotonic correlation between the NOx, THC, and CO emissions and the ethanol blending ratio due to the competing effects of oxygen-containing properties, higher latent heat of evaporation (LHE), intake-charge cooling effect, and higher combustion temperature. Ethanol blending, except for E100, does not exhibit the PN reduction tendency. Knock deteriorates PN emissions, especially in nucleation mode, and ethanol blending shifts its size distribution towards nucleation mode.