The increased population has resulted in extra use of conventional sources of fuels due to which there is risk of extinction of fossil fuels’ resources especially petroleum diesel. Biodiesel is emerging as an excellent alternative choice across the world as a direct replacement for diesel fuel in vehicle engines. Biodiesel offers a great choice. It is mainly derived from vegetable oils, animal fats and algae. Hence in this paper effort has been made to find out feasibility of biodiesel obtained from eucalyptus oil and its impact on diesel engine. Higher viscosity is a major issue while using vegetable oil directly in engine which can be removed by converting it into biodiesel by the process of transesterification. Various fuel properties like calorific value, flash point and cetane value of biodiesel and biodiesel–diesel blends of different proportions were evaluated and found to be comparable with petroleum diesel. The result of investigation shows that Brake Specific Fuel Consumption (BSFC) for two different samples of B10 blend of eucalyptus biodiesel is 2.34% and 2.93% lower than that for diesel. Brake Thermal Efficiency (BTE) for B10 blends was found to be 0.52% and 0.94% lower than that for diesel. Emission characteristics show that Smoke Opacity improves for both samples, smoke is found to be 64.5% and 62.5% cleaner than that of diesel. Out of all blends B10 was found to be a suitable alternative to conventional diesel fuel to control air pollution without much significant effect on engine performance. On comparing both samples, biodiesel prepared from sample A of eucalyptus oil was found to be superior in all aspects of performance and emission.