Diesel engines are widely used in the surface transport system. They are the main source of economic growth of a nation. Nowadays, awareness of the environment compels people to adopt stringent emission norms. The rapid depletion of fossil fuels and the increase in the emission levels have caused concerns globally. An eco-friendly alternate is required to fulfil the growing demand. This paper focuses on alternate fuels and the importance of choosing palm oil. The energy density and higher cetane number are its major advantages. Also it reduces environmental pollution drastically. The viscosity of palm oil is a problem like other vegetable oils, which affects the fuel spray pattern. It reduces the efficiency of the combustion to a large extent. To overcome the problem, the pre-heating technique and transesterification process are adopted in this work. Performance tests were conducted on a single cylinder, four-stroke, direct injection diesel engine coupled with eddy current dynamometer, and emission was monitored using an AVL exhaust gas analyser. The results indicated that vegetable oil fuels have lower brake thermal efficiency compared to that of diesel. Pre-heated oil and methyl ester showed an appreciable reduction in hydrocarbon (HC) and carbon monoxide (CO) emissions and higher exhaust temperature and nitric oxide (NOx) emission.