Increased urbanization and increase in population has led to an increased demand for fuels. The result is the prices of fuels are reaching new heights every day.The diesel engines has led to the emission of hazardous gases like Sulphur oxides, nitrogen oxides and carbon monoxide, which can further led to problems like acid rain.These emissions can also affect human health and increase global warming which has led to the need for alternate fuels.Biodiesel is one of the alternatives which are being widely studied and its production from oil seeds is limited by crop land displacement.Production of biodiesel from algae is a promising option. The present work aims to focus on the performance of diesel engine with algae oil as fuel.The properties of algae oil blends with diesel are tested in a variable compression ratio engine (VCR engine) and its performance and emission characteristics are studied.