The engine emissions caused by burning fossil fuels areone of the concerns across the world. Recently, biodiesel and ethanol are well recognized as appropriate alternative fuels for diesel engines. In many countries,bioethanol and biodiesel have attracted great attentionas alternative fuels in application and research because of their renewability and environmentally friendly properties and reduction of fossil resources. Here the benefits and limitations of biofuels as alternative fuels in diesel engineswere reviewed. The effects of various mixtures of diesel fuel and biofuels like biodiesel-diesel, ethanol-diesel, and biodiesel-ethanol-diesel blends on diesel engineswere discussed. Blending biodiesel and ethanol in diesel fuel and using it as the blended fuel in the diesel engine has a considerable potential to reduce exhaust emissions and subsequently environmental pollution. However, an extra ratio of ethanol and/or biodiesel in the blended fuel can cause some drawbacks in the diesel engine, which turns out the necessity of optimization to introduce the optimallyblended fuels in terms of all aspects of operational and environmental issues. Wherefore, simultaneously optimization of the operational factors and the exhaust emissions of the diesel engine fuelby the blended fuels consistingof biofuels and other additives was recommended in future studies.