A computational study is performed to investigate the effects of physical property on diesel engine combustion characteristics using bio-diesel fuels. Properties of typical bio-diesel fuels that were either calculated or measured are used in the study and the simulation results are compared with those of conventional diesel fuels. Sensitivity of the computational results to individual physical properties is also investigated, and the results can provide information for desirable characteristics of the blended fuels. The properties considered in this study include liquid density, vapor pressure, surface tension, liquid viscosity, liquid thermal conductivity, liquid specific heat, latent heat, vapor specific heat, vapor diffusion coefficient, vapor viscosity and vapor thermal conductivity. The results show significant effects of the fuel physical properties on ignition delay and burning rates at various engine operating conditions. It is seen that there is no single physical property that dominates differences of ignition delay between diesel and bio-diesel fuels. However, among the 11 properties considered in the study, the simulation results were found to be most sensitive to the liquid fuel density, vapor pressure and surface tension through their effects on the mixture preparation processes.