Internal combustion (IC) engine is an attractive main power resource for transportation and in the foreseeable future also their domination never going to be altered. However, almost half of the energy from the fuel supplied to the IC engines is going as waste heat to the environment in the means of cooling and exhaust systems. This waste heat from the exhaust gasses were used to preheat the Palm Oil (PO)/diesel blends to 60 °C with the help of heat exchanger to obtain a homogenous mixture. This research work emphasizes on the performance, combustion and emission characteristics of a four stroke, single cylinder natural aspirated, water cooled direct injection (DI) diesel engine using preheated Palm Oil (PO)/diesel blends. Engine tests were conducted with preheated palm oil/diesel blends (PO20, PO30 and PO40) and pure diesel at a constant speed of 1500 rpm for different load conditions. The results of engine performance like Brake Specific Fuel Consumption (BSFC), Brake Thermal Efficiency (BTE) and Combustion characteristics of Heat release rate, cylinder pressure and emissions like Carbon Monoxide (CO), unburned Hydro Carbon (HC), Nitrogen Oxide (NOx) and Smoke Opacity of all palm oil blends were compared with pure diesel fuel. The result reveals that, PO20 blend is the most preferable blend among the other palm oil blends. To further improve the performance characteristics of PO20, fuel additives such as BHT (2000 ppm) and n-butanol (20% by volume) is added to the PO20 blend. The brake specific fuel consumption and brake thermal efficiency of the PO20 + BHT blend is 11.4% and 5.1% higher than that of diesel fuel. The CO emission of PO20 + butanol blend shows 37.5% lower, whereas the NOx emission is 1.9% higher than that of diesel fuel. Moreover the smoke and EGT is observed to be 13% and 3.1% lower compared to diesel fuel. This research work reveals that, preheated palm oil and its blends with antioxidant proved better performance and emission levels than diesel fuel. So from an environmental point of view palm oil blends with diesel fuel will be a more promising alternative fuel in the near future. © 2018 Elsevier Ltd