There are so many methods are used to improve the efficiency of a diesel engine, reduced fuel consumption. For this purpose, one of the technologies is used that is ceramically coated IC engine. It is also known as Thermal barrier coating (TBC). In the present work, YSZ has used as thermal barrier coating on combustion chamber to increase the thermal efficiency and reduce the fuel consumption. In this experimentation, YSZ – TBC is done by plasma spray coating technique which is the simplest method. Production of biodiesel from algae is a promising option. The present work aims to focus on the performance of a diesel engine with algae oil as fuel. In order to use the oil in an engine, its blends with the petroleum diesel were prepared. It is found that the properties of neat algae oil and its blends are very close to the properties of neat diesel. The investigation was carried out in the single cylinder water cooled, constant speed DI diesel engine with Yttria Stabilized Zirconia as Thermal Barrier Coating with the Diesel fuel and various blends of biodiesel like B20, B40, B60, B80, and B100. Here, the investigation carried out at idle load, part load and full load conditions. The combustion characteristics were analyzed at various load conditions for baseline without coating and YSZ –TBC coated engine. Here, YSZ – TBC coated engine have better combustion characteristics compared with the uncoated engine because of the thermal barrier coating on combustion chamber which gives the high heat release rate due to its high coefficient and low thermal conductivity. The blend of B20 has higher heat release rate characteristics. The addition of fuel additives is one of the possible approaches for increases the combustion characteristics. The present work, DEE is used as additives to improve the combustion characteristics of YSZ – TBC coated engine. Among the various blends tested, B20 + 5% DEE has better combustion characteristics.