The use of modern biofuels in mobile applications has an enormous potential to reduce greenhouse gases as well as engine pollutant emissions, such as soot or nitrogen oxides. This beneficial effect is directly related to the molecular structure of the biofuel as a product of an optimized production process. To understand the influence and emission reduction potential of the large variety of different fuel properties, this study aims to identify desirable fuel characteristics and define optimized biofuel components. In a first step, a literature survey is carried out, focusing on the impact of the cetane number, boiling characteristics, and aromatic and oxygen contents on the diesel combustion process. The incorporated investigations that analyze the combustion behavior, engine efficiency, and emission performance underline the potential of tailoring fuels to desired properties. From this foundation, a model-based analysis of desired fuel properties was conducted, using a large database with 32 different fuels (single molecules and fuel mixtures). With multiple correlation methods, different fuel properties can be used to predict the emission performance of the engine. The following fuel optimization based on emission performance and engine efficiency results in ideal fuel properties for diesel engine combustion. As it turns out, a blend of 2-methyltetrahydrofurane (2-MTHF) (which can be derived from cellulose) blended with di-n-butylether complies with the desired fuel properties, which were defined before. In combination with an improved homogeneous low-temperature combustion process and an increased ignition delay, a nearly soot-free diesel combustion over a wide load range is realized. The oxygenated fuel enables increased exhaust gas recirculation (EGR) rates while maintaining the high engine efficiency of the diesel process.