This paper investigated the prospects of biodiesel production from macadamia oil as an alternative fuel for diesel engine. The biodiesel was produced using conventional transesterification process using the base catalyst (KOH). A multi-cylinder diesel engine was used to evaluate the performance and emission of 5% (B5) and 20% (B20) macadamia biodiesel fuel at different engine speeds and full load condition. It was found that the characteristics of biodiesel are within the limit of specified standards American Society for Testing and Materials (ASTM D6751) and comparable to diesel fuel. This study also found that the blending of macadamia biodiesel⁻diesel fuel significantly improves the fuel properties including viscosity, density (D), heating value and oxidation stability (OS). Engine performance results indicated that macadamia biodiesel fuel sample reduces brake power (BP) and increases brake-specific fuel consumption (BSFC) while emission results indicated that it reduces the average carbon monoxide (CO), hydrocarbons (HC) and particulate matter (PM) emissions except nitrogen oxides (NOx) than diesel fuel. Finally, it can be concluded that macadamia oil can be a possible source for biodiesel production and up to 20% macadamia biodiesel can be used as a fuel in diesel engines without modifications.