The exhaust gas from the diesel engine exhausted to the atmosphere as waste carries approximately 30% of the heat of combustion. By providing proper Waste Heat Recovery System (WHRS), a considerable amount of heat can be saved. In the present study, the shell and tube heat exchanger and Thermal Energy Storage System (TESS) contained Paraffin Phase Change Material (PPCM) incorporated with a diesel engine system to extract heat from the exhaust gas. The performance of the heat exchanger and thermal storage tank were investigated under the different loading condition. It is found that 86.45 kJ/kg of heat energy extracted from the heat exchanger and 0.54 kW of heat energy is saved at full load condition; it is nearly 7% of fuel power is stored as heat in the storage system, and the water can be utilized for suitable applications which are available reasonably at higher temperature. © 2015, Sphinx Knowledge House. All rights reserved.