This paper discusses the influence of biodiesel on output characteristics of a diesel engine and optimal timing setup for its injection pump. The influence of biodiesel is studied by running experiments on an NA diesel bus engine MAN D2 2566 with a direct-injection M system. The fuel used is biodiesel produced from rapeseed. Special attention is focused on the determination of the optimal injection-pump timing with respect to engine harmful emissions, engine fuel consumption, and other engine performance parameters. These engine characteristics are compared against those obtained using conventional D2 diesel. Experiments with biodiesel and D2 are run on several engine operating regimes. The engine was monitored for possible operation problems and carefully examined after the tests. The results obtained are presented and analyzed. It is shown that with carefully optimized timing of the pump, the harmful emission of NOx, smoke, HC, and CO can be reduced essentially by keeping other engine characteristics within acceptable limits.