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Because of higher NOx and PM emissions Compression Ignition (CI) engines are slowly being replaced by gas engines in metro cities though CI engine have better thermal efficiency and emit less Carbon monoxide (CO) and Unburned Hydrocarbons (UHC) emission than SI engines. Pollutants formed during combustion, depleting fossil fuels and continuous raising fuel price pushes the research community to find new alternative fuels which can be used along with diesel or replace the diesel without making major modifications in the current engine. The objective of this research work is to derive bio-diesel fuel from the source of algae and use it as a fuel by blending with commercially available diesel fuel. Heptanol is added along with algae bio-diesel and diesel blend to improve the ignition quality of the blend. Tests were conducted on a single cylinder constant speed, water cooled stationary diesel engine with different blends proportions of heptanol-biodiesel-diesel.