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As neat crude palm oil is not ideally suitable as a fuel for diesel engines because of its high viscosity; process of transesterification was adopted to develop methyl ester of palm oil that approximate the properties and performance of hydrocarbon-based diesel fuel. Various properties of the methyl ester of palm oil were evaluated and compared in relation with that of neat diesel. The prepared methyl ester of palm oil, blended in different concentrations with neat diesel was then subjected to performance and emission tests in order to evaluate its suitability in diesel engine. The data thus generated were compared with base line data generated from neat diesel. An optimal blend of 10-20% methyl ester of palm oil with neat diesel exhibited best performance and smooth engine operation without any symptoms of undesired combustion phenomenon. This suggests use of 10-20% of biodiesel developed from palm oil in diesel engine with out any difficulty.