The major drawbacks of using biodiesel as a neat fuel are low oxidation stability, high viscosity, lower thermal efficiency and higher NOx emission. Many studies have been attempted to reduce the drawbacks of biodiesel and to use it as a conventional fuel. The present work aims to reduce the problems associated with neat biodiesel using addition of non-polluting additives. Mahua oil has been chosen as a biodiesel due to its non-edible nature and properties similar to diesel. Mahua oil methyl ester (MOME) was prepared by conventional transesterification. Ferrofluid, comprising of magnetite of 14 nm size was added to the base fuel and is referred to as MOMEF (Mahua Oil Methyl Ester with the addition of Ferrofluid). The advantage of ferrofluid is that, unlike other additives, it can be extracted from the exhaust gas. Ferrofluid releases additional heat during the course of the combustion process which reduces its conventional drawbacks. Furthermore, it can be easily diluted to biodiesel and as a result it can collect the benefits of water-biodiesel emulsions. This fuel modification is expected to improve the properties of mahua oil methyl-ester and to eliminate problems associated with it. Performance, combustion and emission tests were carried out in a 21 kW power, four-stroke, twin-cylinder, direct-injection, compression-ignition engine. Experimentally, it was observed that methyl esters of mahua oil can be combusted in an IC engine like other biofuels without any major modifications. Experiments were conducted with MOME and MOMEF and are compared with conventional diesel. The experimental analysis revealed an increase in brake thermal efficiency of about 5.27% and a decrease in brake specific fuel consumption of about 5.37%. In addition the HC, CO and NOx emissions were reduced by 10.8%, 6.44% and 9.49% respectively. (C) 2017 Institution of Chemical Engineers. Published by Elsevier B.V. All rights reserved.