Lean combustion and exhaust emission characteristics in a spark ignition engine (SI engine) with variation of the ethanol-gasoline blending ratio and the excess air ratio were investigated in this research. To investigate the influence of the excess air ratio and ethanol blends, the lean combustion characteristics such as brake torque, cylinder pressure, and the rate of heat release (ROHR) were analyzed under the various excess-air ratios. In addition, the reduction effects of exhaust emissions such as carbon monoxide (CO), unburned hydrocarbon (HC), oxides of nitrogen (NOx), and carbon dioxide (CO2) were compared with those of gasoline fuel. The results showed that the peak combustion pressures and the ROHR of all test fuels linearly decreased as the excess air ratio (lambda > 1.0) increased. As compared with gasoline fuel (G100) at each given excess air ratio, there were slight improvements in combustion pressure for ethanol blended fuels (E20-E100). The power output and brake mean effective pressure (BMEP) slightly increased at each air fuel ratio condition compared to G100 as the increase of ethanol fraction. The difference in the power and BMEP between E100 and G100 were maximized with the increases in the air-fuel ratio up to lambda = 1.5. Ethanol blends have higher BSFCs compared to G100 and also achieved fairly stable combustion features at all excess air ratios compared to gasoline. NOx emissions tended to decrease proportionally with increases in the excess air ratio for all test conditions, and all of the ethanol blends emitted slightly less NOx compared to G100.