The petroleum-based fuels are limited reserve fuels, with our present known reserves and the growing rate of consumption, it is feared that they are not going to last long. These finite resources of petroleum and highly concentrated in certain regions of the world has given rise to frequent disruptions and uncertainties in its supply and as well as price. This situation has created a problem to increase the prices of these oils. The growing dependence on oil has created great scarcities and hardships with serious economic imbalance. A part from the problem of fast vanishing reserves, Petroleum fueled vehicles discharge significant amount of pollutants. In view of these problems attempts must be made to develop the technology of alternate clean burning fuels. The alternative, which satisfies all these requirements, is bio-diesel. Bio-diesel is methyl or ethyl ester of fatty acid made from virgin or used vegetable oils (both edible and non-edible) and animal fat, by converting the triglyceride oils to methyl (or ethyl) esters with a process known as transesterification. Bio-fuels are important now and offer increase in potential for the future. This paper consists two phases. The phase one dealt with preparation of bio-diesel from Cotton Seed Oil (C.S.O), which is available at cheaper price, as it is byproduct from cotton industries. Its properties were determined experimentally and compared with the conventional diesel fuel. The second phase dealt with conduction of experiments on a single cylinder, 4-stroke, direct injection Diesel Engine without modifications at constant speed 1500 rpm for various loads using 100% bio-diesel and conventional diesel fuel. It noticed that, the performance of the engine is not severely deviated by the substituted renewable biodiesel inaddition considerable decrease in smoke level. It is concluding that the biodiesel is superior fuel from the environmental and performance point of view, addition to this reducing the import of oil and consequentially improving energy security as a renewable alternate fuel.

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