A comparative study on engine performance and emissions (NOx, soot) formation has been carried out for the Volvo D12C diesel engine fueled by Rapeseed Methyl Ester, RME and conventional diesel oil. The combustion models, used in this paper, are the modifications of those described in [1–2]. After the compilation of liquid properties of RME specified as methyl oleate, C19H36O2, making up 60% of RME. The oxidation mechanism has been compiled based on methyl butanoate ester, mb, C5H10O2 oxidation model [3] supplemented by the sub-mechanisms for two proposed fuel constituent components, methyl decanoate, md, C11H22O2, n-heptane, C7H16, and soot and NOx formations reduced and “tuned” by using the sensitivity analysis. A special global reaction was introduced to “crack” the main fuel into constituent components, md, mb and propyne, C3H4, to reproduce accurately the proposed RME chemical formula. The sub-mechanisms were collected in the general one consisting of 99 species participating in 411 reactions. The combustion mechanism was validated using shock-tube ignition-delay data at diesel engine conditions and flame propagation speeds at atmospheric conditions. The engine simulations were carried out for Volvo D12C engine fueled both RME and conventional diesel oil. The numerical results illustrate that in the case of RME, nearly 100% combustion efficiency was predicted when the cumulative heat release, was compared with the RME LHV, 37.2 kJ/g.. To minimize NOx emissions, the effects of 20–30% EGR levels depending on the engine loads and different injection strategies were analyses. To confirm the optimal engine operation conditions, a special technique based on the time-transient parametric φ-T maps [4] has been used.