Nowadays, the decrease in fossil based energy reserves and their negative impact on the environment have increased the interest in alternative energy sources. Vegetable oils and animal fats are used as alternatives of fuels that are used in diesel engines. High viscosity of vegetable oils and animal fats cause several problems in diesel engines. Methods such as dilution, pyrolysis, and transesterification are utilized to eliminate these problems. In this study, using transesterification method, biodiesel is produced from 30% animal fat 70% palm oil blend which has a substantial potential for being an alternative fuel for diesel engines. The impact of biodiesel on engine performance and exhaust emissions are investigated on a single cylinder, air cooled, pre-combustion chamber diesel engine. Engine performance values of biodiesel are obtained close to those values of diesel fuel. A decrease in CO emission and a slight increase in NO emission are observed. Following the experimental results, it is concluded that biodiesel produced from 30% animal fat and 70% palm oil could be used as an alternative fuel for diesel engine. Moreover, the positive impacts of biodiesel on environment in terms of exhaust emissions also increase its potential of being an alternative fuel.