This study investigates the effects of carbon coated aluminum (Al@C) nanoparticles added to diesel-biodiesel blends as additives on engine performance and emissions. The Al@C nanoparticles are added into the diesel-biodiesel fuel in the mass fractions of 30 ppm under ultrasonic mixing. The experimental tests are conducted using a Cummins diesel engine. For comparison, three kinds of fuels including diesel-biodiesel blend (B10), B10 with 4% ethanol (B10E4), and B10 with 4% ethanol and 30-ppm nanoparticles (B10E4N30) are used for the tests under the European Stationary Cycle (ESC). The results show clearly that adding Al@C nanoparticles can reduce brake specific fuel consumption (BSFC) by 6% on average; along with a drop of 6% in NOx emission and CO emission is reduced by 19%, comparing with B10. However, the presence of ethanol in fuel blend increases THC emission. Nevertheless, addition of Al@C nanoparticles reduces THC emission by 14.5% compared with B10E4. The emission of particles number (PN) is increased by 2.2 times for B10E4N30 on average but is reduced by 11.8% for B10E4 (adding ethanol only) on the contrary, compared to B10. The studies on morphology and phase structure of nanoparticles after combustion indicate that Al@C nanoparticles have been transformed into alumina nanoparticles.