Rotary engine has a flat combustion chamber that results in high unburned fuel leading to fuel inefficiency and emissions. Biodiesel regarded as a clean source of energy is an alternative fuel due to its ability to minimize environmental pollution resulting from unwanted emissions. In this regard, the improvement of combustion efficiency of a direct injection rotary engine fueled with biodiesel was numerically investigated. Experimental data was used in validating the established three-dimensional computational fluid dynamics (3D-CFD) model. On this basis, investigation of various biodiesel injection timing (IT) (100, 80, 60) °CA before top dead center (BTDC), spark timing (ST) (35, 30, 25, 20) °CA BTDC and equivalence ratios (∅) (0.6, 0.8, 1.0, 1.2) on mixture formation and combustion process was carried out. Results revealed that when IT retarded fuel distribution narrows and the mixture formed is concentrated. Conversely when ST retarded there is broad and dispersed fuel distribution. For lean condition the mixture formed is less concentrated compared to rich condition. For combustion process, when biodiesel was concentrated at the middle of in-cylinder at 30 mm (X-axis) and 15 mm (Z-axis) from the centerline in opposing directions it was better for spark-on. Also, the in-cylinder pressure and temperature reduced with advanced IT, retarded ST and decreased ∅. When ∅ leaned, flame development and propagation periods decreased. The suitable rate for combustion considering emissions was obtained when IT was 80°CA (BTDC) and ST 35°CA (BTDC) at a ∅ of 0.8 because when compared to the original scheme (case B4), maximum combustion pressure increased by 28.57% and increase of CO2, CO, soot and NO emissions were reasonable due to increase in temperature and fuel evaporation.