Diesel engines are known for their high torque and are widely used in automotive, maritime, and industrial sectors because they offer superior power output and efficiency. Fuel additives are explored and utilized by industries and researchers because they may offer superior performance, combustion, and emission characteristics. Laboratory prepared, low-cost butyl palmitate blended with diesel was used as a fuel additive in a single-cylinder, four-stroke, water-cooled diesel engine with a power output of 3.5 kW at constant rpm. This work investigates its effects on diesel engine performance, combustion, and soot morphology and emissions characteristics across various engine loads. Experiments were conducted using four different fuel compositions, including (1) diesel [D100], (2) diesel blended with 4% butyl palmitate solution [D100 + BP], (3) 90% (v/v) diesel blended with 10% (v/v) methanol [DM10], and (4) DM10 blended with 4% butyl palmitate solution [DM10 + BP]. This study investigates various parameters, including brake thermal efficiency (BTE), brake specific fuel consumption (BSFC), in-cylinder pressure traces, peak pressure, emissions [hydrocarbons (HC), carbon monoxide (CO), oxides of nitrogen (NOx)], and soot morphology. The DM10 + Butyl Palmitate test fuel showed relatively superior BTE with an increasing load compared to that of the other test fuels. BSFC was found to decrease for DM10 + Butyl Palmitate fuel. The addition of additives to DM10 have marginally decreased gas emission. This research is crucial for understanding the impact of fuel additives, particularly butyl palmitate, on engine performance and emissions. The findings could be used by fuel industries in making decisions regarding vital performance and emission characteristics.