This paper is focused to evaluate the effect of oxygenated diesel fuel on the engine performance and emissions, identify the oxygenates suitable for future diesel formulations, and to perform limited emissions and the performance testing of the oxygenated diesel blends and to select the suitable oxygenated compounds for future diesel formulations. From the literature survey and initial screening of 71 oxygenates, the following compounds are selected based on oxygen content, flashpoint etc. Diethyl carbonate, 2 Ethoxy ethanol and Diethyl ether - oxygenated compounds [1] These selected oxygenates are blended with diesel fuel in proportions of 2.5, 5 and 7.5 % by volume and experimental study is conducted in a single cylinder naturally aspirated Direct injection diesel engine. An eddy current dynamometer is coupled with the engine and the experimental study is carried out to evaluate the effect of the three oxygenated compounds on emissions and performance [2]. Comparison of performance of plain diesel and blended diesel with different oxygenated compounds having different mixing levels of oxygenates is carried out. The performance of oxygenates on power, brake thermal efficiency, cylinder peak pressure, HC, CO and NOX , smoke level and particulate matter are studied. All the three oxygenated compounds are found to be effective at reducing Smoke and Particulate levels by 30 to 40 % in 7.5 % blending, 2 Ethoxy ethanol is more effective than the other two compounds. Comparing the cost and performance Diethyl carbonate gives optimum value and Diethyl ether follows. There is a moderate increase in power output and also in thermal efficiency.