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Bio-fuels potentially represent a more environmentally friendly alternative to fossil fuels as they produce fewer greenhouse gas emissions when burned. Ethanol is one such bio-fuel alternative to the conventional fossil fuels. Towards the initiative of sustainable transportation using alternative fuels, it is attempted to develop an ethanol powered engine for commercial vehicles and this paper attempts to explain the 1D thermodynamic simulation carried out for predicting the engine performance and combustion characteristics, as a part of the engine development program. Engine simulation is becoming an increasingly important engineering tool for reducing the development cost and time and also helps in carrying out various DOE iterations which are rather difficult to be conducted experimentally in any internal combustion engine development program. AVL Boost software is used for modeling and simulation.