Jatropha biodiesel was produced from neat jatropha oil using both esterification and transesterification processes. The free fatty acid value content of neat jatropha oil was reduced to approximately 2% from 12% through esterification. Aluminium oxide (Al2O3) and cerium oxide (CeO2) nanoparticles were added separately to jatropha biodiesel in doses of 100 ppm and 50 ppm. The heating value, acid number, density, flash point temperature and kinematic viscosity of the nanoadditive fuel samples were measured and compared with the corresponding properties of neat fossil diesel and neat jatropha biodiesel. Jatropha biodiesel with 100 ppm Al2O3 nanoparticle (J100A100) was selected for engine testing due to its higher heating value and successful amalgamation of the Al2O3 nanoparticles used. The brake thermal efficiency of J100A100 fuel was about 3% higher than for neat fossil diesel, and was quite similar to that of neat jatropha biodiesel. At full load, the brake specific energy consumption of J100A100 fuel was found to be 4% higher and 6% lower than the corresponding values obtained for neat jatropha biodiesel and neat fossil diesel fuels respectively. The NOx emission was found to be 4% lower with J100A100 fuel when compared to jatropha biodiesel. The unburnt hydrocarbon and smoke emissions were decreased significantly when J100A100 fuel was used instead of neat jatropha biodiesel or neat fossil diesel fuels. Combustion characteristics showed that in almost all loads, J100A100 fuel had a higher total heat release than the reference fuels. At full load, the J100A100 fuel produced similar peak in-cylinder pressures when compared to neat fossil diesel and neat jatropha biodiesel fuels. The study concluded that J100A100 fuel produced better combustion and emission characteristics than neat jatropha biodiesel.