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In this research, the potential of Diethyl ether (DEE) which is a renewable bio-based fuel has been identified as a supplementary oxygenated additive to improve fuel properties and combustion characteristics of biodiesel (Karanja oil methyl ester - KOME) like its high viscosity, cold starting problems and a high level of NOx emissions through an experimental investigation. The tests were conducted on a single cylinder DI diesel engine fueled with neat KOME as a base fuel and blends of 5, 10, 15 and 20% DEE on a volume basis. Some physicochemical properties of test fuels such as heating value, viscosity, specific gravity and distillation profile were determined in accordance to the ASTM standards. The results obtained from the engine tests have shown a significant reduction in NOx emissions especially for DEE addition of more than 10% on a volume basis and a little decrease in smoke of DEE blends compared with neat KOME.