With the utilization of biodiesel as fuel in diesel engines, performance parameters reduce while certain emissions like NOx increases. This study presents the extensive investigation on utilizing biodiesel blends, ethanol, exhaust gas recirculation (EGR), and magnetization of fuel (MF, 3000 Gauss) in a four-stroke, single-cylinder vertical diesel engine to get an optimum level of performance and emission characteristics. In this investigation, biodiesel blends, ethanol, and diesel have been used as fuel. EGR has been used with the BD20E5 (Fuel blends containing 20% biodiesel, 75% diesel, and 5% ethanol) blend only. The results of this experimental investigation show that there are increases of 0.36% and 0.33% in brake power and decreases of 4% and 5.7% in brake specific fuel consumption with BD20E5 and BD20 + MF, respectively, as compared to BD20 only. With 30%EGR and BD20E5 there is a decrease of 36.36% in NOx emission as compared to BD20E5. It is found that the use of ethanol in lower quantity (E5) in fuel blends improves performance parameters and reduces emissions of CO, NOx, and smoke as compared to unadded biodiesel blends. EGR reduces NOx emission very effectively, but at higher EGR volume (30% EGR), performance parameters deteriorate and emissions of CO, HC are higher. To overcome these penalties with higher EGR, it can be used in lower volume (10% EGR) in combination with 5% ethanol and magnetized fuel, which has given optimum results for performance as well as emission parameters.