Ever increasing drift of energy consumption due to growth of population, transportation and luxurious lifestyle has motivated researchers to carry out research on biofuel as a sustainable alternative fuel for diesel engine. Biofuel such as biodiesel and ethanol, produced from renewable feedstocks, are the most appropriate alternative of petroleum fuels. However, direct using of ethanol in diesel fuel face some technical problem especially in cold weather, due to low cetane number, lower flash point and poor solubility. Biodiesel can be blended with both ethanol and diesel fuel and biodiesel–alcohol–diesel blends can be used in diesel engines. The aim of this review paper is to discuss the effect of mixed blends of biodiesel alcohol and diesel on engine performance and emission parameters of a diesel engine. Most of the researchers reported that adding ethanol into biodiesel-diesel blend in diesel engines significantly reduce HC, PM, NOx and smoke emissions but slightly increase fuel consumption. The study concluded that biodiesel-diesel-ethanol blend can be used as a substitute of petro-diesel fuel to reduce dependency on fossil fuel as well as the exhaust emissions of the engine.