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Blending an oxygenate with diesel fuel modifies chemical and physical properties that can alter the engine operating parameters, combustion and emission levels. In this paper an effort has been made to simulate the performance of a direct injection diesel engine fuelled with oxygenate blended diesel. In this simulation the CI engine cycle was simulated for both diesel and oxygenate blended diesel fuel with a closer duration of each crank angle degree. The thermodynamic property at each crank angle is calculated based on the first law of thermodynamics. The fluid motion inside the engine cylinder is considered for simulation. Heat release was calculated using WIEBE's heat release model considering two-zone combustion. The gas-wall convection heat transfer is calculated using ANNAND's heat transfer model considering combustion chamber temperature swings. In the gas exchange model, gas flow rates during intake and exhaust systems were calculated.