The objective of this analysis is to determine optimum parameters for maximum performance and minimum emission for biodiesel-fueled diesel engine. The experiments were designed using Taguchi L25 orthogonal array. Five parameters—fuel blend, load, speed, injection timing, and injection pressure—each with five levels were selected. Cylinder pressure, exhaust temperature, brake thermal efficiency, brake specific fuel consumption, carbon monoxide, unburned hydrocarbons, nitric oxide, and smoke were response parameters. Optimum combination of parameters was determined by grey relational analysis. The confirmatory test was performed at optimum combination. The grey relational grade and signal-to-noise ratio was determined. The contribution of individual parameter was determined by ANOVA analysis. Optimum performance was obtained at 80% load and 1900 rpm speed with B50 fuel at injection timing of 15.50 BTDC with 225 bar injection pressure. Finally, grey relational grade was improved by 3.7%.