Small displacement two-stroke engines are cheap and low-maintenance propulsion systems and commonly used in scooters, recreation vehicles and handheld power-tools. The restriction of emission legislation and the increasing environmental awareness of end users as well as decreasing energy resources cause a rethinking in the development of propulsion systems and fuels in these fields. Despite recent improvements of electric powertrains, two stroke engines are the unchallenged propulsion system in high performance handheld power tools at the moment. The reasons are the extraordinary high power to weight ratio of two-stroke engines, the high energy density of liquid fuels and the reliability of the product with respect to extreme ambient conditions. Nevertheless, further improvements on emissions and fuel consumption of small displacement two-stroke engines have to be realized. This research is focused on the use of alternative renewable fuels, so called biofuels, like ethanol and 2-butanol in small displacement two-stroke engines. The different physical and chemical properties of ethanol and 2-butanol can have a positive impact on the combustion process and emission composition and are a possibility to contribute future engine requirements. Beside advantages in combustion and emission behavior, liquid biofuels also have an advantageous CO2 lifecycle in comparison to conventional gasoline. To point out the characteristics of different alcohol gasoline blends the ignition timing and the air to fuel equivalence ratio has been modified in a wide range. The results are focused on knock and pre-ignition behavior, fail ignition, combustion stability and emissions under rich and lean operation. On this basis, it is possible to find out the boundary conditions for an alcohol fuel use in small displacement two-stroke engines and serving as basis for future combustion process developments with respect to decreasing emissions and fuel consumption.