In the current phase of world economy, the utilization of the petroleum-based fossil fuels has drastically surpassed the supply. This scenario supplements to the fact that there is an ever increasing necessity for industrialization, specifically in the transportation sector. This requirement and supply of the petroleum and diesel fuels have an astounding impact over the market economy and related commodities. Low viscous and low cetane number biofuels are getting more attention for their usage in engine applications without any further processing. In the present work, lemon peel oil is being fuelled in diesel engine at different timing of injection and exhaust gas recirculation rates. Operation of lemon peel oil (LPO) at standard operating conditions results in increased brake thermal efficiency by consuming less fuel when compared with diesel fuel. The LPO biofuel properties such as boiling point and viscosity being lower leads to better evaporation capacity and thereby results in complete combustion. The advancement in injection timing of 25° bTDC and 27° bTDC resulted in the efficiency increment of 2.17% and 6.19% respectively. Furthermore, the smoke, carbon monoxide and hydrocarbon emissions are decreased in consequence on increased nitrogen oxide (NOx) emissions. Hence, in order to decrease the content of nitrogen oxide emissions in the exhaust, exhaust gas recirculation (EGR) has been implemented in the present work. For EGR rate of 10% and 20%, the NOx emissions is reduced by 43% and 46% respectively for 27° bTDC injection timing. Thus, the advancement of injection timing with optimum EGR is a viable option for the lemon peel oil biofuel in diesel engine with superior performance and emission output. © 2019, Springer-Verlag GmbH Germany, part of Springer Nature.