This study presents effect of engine performance, exhaust emissions and combustion characteristics of a single cylinder laboratory based four stroke cycle direct injection (DI) diesel engine fueled by neat coconut oil methyl ester (COME) injected through conventional nozzle (injection pressure 200 bar) and a separate electronic injector is used as retrofit to inject methanol (injection pressure 3 bar) at an appropriate time at suction end after complete opening of suction valve. Tests were conducted at five different loads at rated speed of 1500 rpm. With increase in methanol%, pressure variation increases per degree of crank revolution with progressively increasing delay periods. Biodiesel with 5% methanol injection produced better diffused combustion and a good share of heat release was observed in premixed and diffused combustion zones, besides HC and NO emissions are lower and consistent with minimum change in its value as load is increasing. Smoke emission decreased at individual loading of engine with more methanol (up to 7%) and there is a rise in smoke at 10% methanol injection. Thus a mixture of 5% methanol injection with biodiesel operation is the most economical fuel combination in improving engine performance and decreasing emissions.