This study presents an experimental investigation into the effects of using bio-diesel on diesel engine performance and its emissions. The bio-diesel fuels were produced from vegetable oils using the transesterification process with low molecular weight alcohols and sodium hydroxide then tested on a steady state engine test rig using a Euro 4 four cylinder Compression Ignition (CI) engine. Production optimization was achieved by changing the variables which included methanol/oil molar ratio, NaOH catalyst concentration, reaction time, reaction temperature, and rate of mixing to maximize bio-diesel yield. The technique used was the response surface methodology. In addition, a second-order model was developed to predict the bio-diesel yield if the production criteria is known. The model was validated using additional experimental testing. (C) 2012 Elsevier Ltd. All rights reserved.