This paper investigates the effect of using unleaded gasoline-ethanol blends on SI engine performance and exhaust emission. A four stroke, four cylinder SI engine (type TOYOTA, TERCEL-3A) was used for conducting this study. Performance tests were conducted for equivalence air-fuel ratio, fuel consumption, volumetric efficiency, brake thermal efficiency, brake power, engine torque and brake specific fuel consumption, while exhaust emissions were analyzed for carbon monoxide (CO), carbon dioxide (CO2) and unburned hydrocarbons (HC), using unleaded gasoline-ethanol blends with different percentages of fuel at three-fourth throttle opening position and variable engine speed ranging from 1000 to 4000 rpm. The results showed that blending unleaded gasoline with ethanol increases the brake power, torque, volumetric and brake thermal efficiencies and fuel consumption, while it decreases the brake specific fuel consumption and equivalence air-fuel ratio. The CO and HC emissions concentrations in the engine exhaust decrease, while the CO2 concentration increases. The 20 vol.% ethanol in fuel blend gave the best results for all measured parameters at all engine speeds.