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The performance, emission and combustion characteristics of a diesel engine are investigated using two methyl esters: One obtained from cotton seed oil and other from neem kernel oil. These two oils are transesterified using methanol and alkaline catalyst to produce the cotton seed oil methyl ester (CSOME) and neem kernel oil methyl ester (NKOME) respectively. These biodiesels are used as alternative fuels in low heat rejection engine (LHR), in which the combustion chamber temperature is increased by thermal barrier coating on piston face. Experimental investigations are conducted with CSOME and NKOME in a single cylinder, four stroke, direct injection LHR engine. It is found that, at peak load the brake thermal efficiency is lower by 5.91% and 7.07% and BSFC is higher by 28.57% and 10.71% for CSOME and NKOME in LHR engine, respectively when compared with conventional diesel fuel used in normal engine. It is also seen that there is an increase in NOx emission in LHR engine along with slight increase in CO, smoke and HC emissions. From the combustion characteristics, it is found that the values of cylinder pressure for CSOME and NKOME in LHR engine are near to the diesel fuel in normal engine.