Combustion and heat release of diesel engine operating on both 0# diesel and biodiesel were investigated. The results show that the start timing of combustion is advanced and the ignition delay period is shortened. The peak value of initial heat release is decreased and its corresponding crank angle moves close to the top-dead-center along with the increased combustion duration. Meanwhile, fuel economy and emissions of the diesel engine fueled with 0# diesel and biodiesel were compared. The results show that the specific fuel consumption of biodiesel increases by 12 percent compared with that of diesel fuel due to its low heating value. CO, HC and particulate matter emissions decrease remarkably with the penalty of slightly increased NOx.