The main objective of the work is to optimize the transesterification process for biodiesel production to yield biodiesel that has the best properties, such as viscosity, cetane number, flash point, fire point, and calorific value. Jatropha oil (nonedible vegetable oil) was used to produce biodiesel. Conventional diesel fuel was the base fuel for comparing the above properties of biodiesel. The effect of the quantity of methanol and sodium hydroxide and reaction time were studied to optimize the esterification process. Diesel, blends of biodiesel, and neat biodiesel were tested in a twin-cylinder, water-cooled, four-stroke direct injection diesel engine. Performance and emission of the engine with conventional diesel fuel was used as the basis for comparison.