Diesel Engines are dominating in transportation and agricultural machinery due to its fuel economy and cost effectiveness. Recent survey reveals that the diesel fuel consumption is several times higher than that of gasoline fuel. A suitable alternative fuel for diesel fuel is methyl ester made of vegetable oils. Direct use of this fuel without any modification in diesel engines lead to poor performance and causes some damages on the parts of the engine. Diesel engines reject about two thirds of heat energy of the fuel, one third to the coolant, one third to exhaust leaving only about one third as useful power output. In order to retain the heat produced during combustion thermal barrier coated engines were preferred for bio diesel. The low heat rejection (LHR) engines were developed with uniform ceramic coating of combustion chamber piston crown, cylinder head valves by Partially Stabilised Zirconia (PSZ) of 0.5 mm thickness. Use of biodiesel as fuel in the conventional DI diesel engine results in combustion problems in order to avoid that engines with thermal barrier coatings, which are known as Low heat rejection engines are preferred for biodiesel. The experimental investigation was carried with diesel and bio diesel in uncoated and coated engine and performance parameters were compared. © 2012 Pillay Engineering College.