In modern diesel fuel a proportion of biodiesel is blended with petro-diesel to reduce environmental impacts. However, it can adversely affect the operation of nonwoven coalescing filter media when separating emulsified water from diesel fuel. This can be due to factors such as increasing water content in the fuel, a reduction in interfacial tension (IFT) between the water and diesel, the formation of more stable emulsions, and the generation of smaller water droplets. Standard water/diesel separation test methods such as SAE J1488 and ISO 16332 use monoolein, a universal surface-active agent, to simulate the effects of biodiesel on the fuel properties as part of water separation efficiency studies. However, the extent to which diesel/monoolein and diesel/biodiesel blends are comparable needs to be elucidated if the underlying mechanisms affecting coalescence of very small water droplets in diesel fuel with a low IFT are to be understood. To address this challenge, test fuels composed of reference diesel (REF diesel)/biodiesel and REF diesel/monoolein were experimentally studied to determine fuel properties such as IFT, water content, and dynamic viscosity, as well as online droplet size distributions with reference to IFT. It was found that biodiesel and monoolein do not influence the IFT of water in fuel in a comparable manner and resulting water droplet size distributions are substantially different. Fuels blended with biodiesel exhibited higher viscosity and water content than fuel freshly blended with monoolein. Online measurement of water droplet sizes revealed substantially smaller water droplets in biodiesel blends compared to monoolein blends at the same IFT measured using offline tensiometry. These results may be instructive for the development of standard test methods that simulate the effect of biodiesel blends in fuel-water separation, as well as for improving the design of fuel-water separation systems.