This paper investigated the role of emission characteristics of a diesel engine when ferrofluid blended with Caulerpa Racemosa oil methyl ester (CROME) is used as a fuel. The major problem areas for compression ignition (CI) engines are emissions. Nanofluid using magnetite was synthesized by reacting Iron II (FeCl2) and Iron III (FeCl3) in aqueous ammonia (H5NO) solution to form magnetite ferrofluid (Fe3O4). The fuel that was used in the CI engine was prepared comprising 98.7% [CROME], 1% [Fe3O4], and 0.3% [(CH3)(3)NOH] by volume. The results show that the CI engine works well and the power outputs are steady running with the biodiesel blends at different loads. The acquired information was studied and it was found that there was a decrease in hydrocarbon (HC), carbon monoxide (CO), nitrogen oxide (NOx), sulfur dioxide (SO2), and smoke.