Altitude above sea level and fuel's chemical and physical nature affect engine performance and combustion characteristics. In this work, a combustion diagnosis model including exergy analysis was applied to a turbocharged (TC) automotive diesel engine fuelled with neat palm oil biodiesel (B100) and No. 2 diesel fuel (B0). Tests were performed under steady state operating conditions, at two altitudes above sea level: 500 and 2400 m. Biodiesel fuelling and altitude had an additive effect on the advance in injection and combustion timings. The duration of the premixed combustion stage increased with altitude and decreased with biodiesel. When B100 was used, the transition between this stage and the diffusion stage was practically suppressed. As altitude increased, biodiesel fuelling led to shorter combustion duration, and higher in-cylinder pressures and fuel-air equivalence ratios. Brake thermal efficiency decreased with altitude for both fuels, but in a greater extent for B0. For all fuels and altitudes, exergy destruction rose sharply when combustion started, indicating that this process was the main source of irreversibilities. At both altitudes, the cumulative exergy destruction was higher for B100 due to its earlier and faster combustion process. Some of the results obtained in this work indicate that palm oil biodiesel fuelling can lead to a better engine performance at high altitudes. (C) 2008 Elsevier Ltd. All rights reserved.