In the present study, raw Moringa oleifera oil was converted into biodiesel using transesterification process. The physical and chemical properties were examined based on ASTM standards and compared with diesel. The chemical composition of biodiesel was examined with Fourier Transform Infrared Spectroscopy (FTIR) and Gas Chromatography and Mass Spectrometry (GC-MS). To improve the properties of the prepared biodiesel sample, an anti-oxidant namely 1% Pyrogallol was added. The engine combustion chamber components like piston head, cylinder head and intake and exhaust valves were thermally coated with Yttria Stabilized Zirconia (YSZ) to convert the conventional engine into low heat rejection engine. Kirloskar TV1 model direct injection water cooled diesel engine with eddy current dynamometer was used for experimental analysis. In coated engine, the improved brake thermal efficiency and reduced brake specific fuel consumption were observed with biodiesel and additive blend. Lower carbon monoxide (CO), hydrocarbon (HC), oxides of nitrogen (NOx) and smoke were observed with biodiesel and anti-oxidant blend than diesel fuel.