This study explores the utilization of algal oil methyl ester (AOME) derived from Spirulina spp. as a sustainable alternative to conventional diesel fuel. Algal oil was extracted using solvent extraction and the expeller method, followed by a transesterification process at 75°C for 48 hours using sodium hydroxide and methanol, achieving a conversion rate of 95% with excess methanol. The AOME was then blended with commercial diesel in varying ratios of 5%, 10%, 15%, and 20%. Performance and emission tests were conducted on a single-cylinder, four-stroke, naturally aspirated, water-cooled, direct injection diesel engine to assess the effects of these blends. The results revealed that the brake thermal efficiency (BTE) improved with increasing AOME content, with the 20% AOME blend (AOME20) demonstrating a BTE increase of 2.5% to 3.5% compared to pure diesel. The brake specific energy consumption (BSEC) decreased with AOME20, indicating higher fuel efficiency. Additionally, engine emissions, including hydrocarbons (HC) and nitrogen oxides (NOx), were reduced with the introduction of AOME, particularly under part-load and full-load conditions. The study concludes that AOME, particularly in the 20% blend ratio, is a viable and efficient biofuel alternative, offering enhanced engine performance and reduced emissions