Biodiesel is one of the promising renewable, alternative and environmentally friendly biofuels that can be used in diesel engine with little or no modification in the engine. In the present study an experimental investigation has been carried out on the combustion and performance characteristics of a CI engine running with biodiesel under steady state operating conditions. The experimental work has been conducted on a four-cylinder, four-stroke, direct injection (DI) and turbocharged diesel engine. In this investigation, biodiesel (produced from the waste oil by transesterfication process) and normal diesel have been used. During the experiment the in-cylinder pressure and the specific fuel consumption were measured. The experimental results of this study can be summarised as follows. The tests on engine running with different fuels (biodiesel and diesel) have resulted in almost overlapping P-V diagrams. The power output values at 1300rpm and at 105, 210, 315 and 420 Nm torque values for both the diesel and biodiesel fuels are almost the same. The engine running with biodiesel has produced slightly higher in-cylinder pressure and peak heat release rate than the engine running with normal diesel at all operating conditions. Furthermore, the brake specific fuel consumption values for the engine running with biodiesel are higher than the engine running with normal diesel by a maximum of 14%. However, the thermal efficiency of the engine running with biodiesel is lower than engine running by diesel by 10%.