As global energy demands continue to grow and environmental challenges intensify, biodiesel emerges as a technologically viable and sustainable alternative to mitigate fossil fuel dependency and emissions. This study systematically investigates the performance and emission characteristics of a compression ignition (CI) engine powered by ethanol-cottonseed biodiesel (Cs) blends enhanced with aluminium oxide (Al₂O₃) nanoparticles. The experimental fuel blends, consisting of 10%, 20%, and 30% cottonseed biodiesel with 5% ethanol and remaining with conventional diesel, were analyzed under varying engine load conditions. The inclusion of ethanol improved fuel atomization due to its lower viscosity and higher volatility, while Al₂O₃ nanoparticles acted as advanced combustion catalysts, promoting enhanced oxidation rates and thermal efficiency. Among the blends, B10 (10% cottonseed biodiesel) exhibited superior performance metrics, achieving a brake thermal efficiency (BTE) of 32.8%, marginally below diesel’s 33.44%, and a 1.6% increase in brake- specific fuel consumption (BSFC). Emission analysis demonstrated a significant reduction in nitrogen oxides (NOₓ) emissions of 7.14%, 10.71%, 14.29% recorded for B10, B20, B30 blends respectively. Carbon monoxide (CO), unburned hydrocarbons (HC), and smoke opacity are slightly increased. The overall emissions profile confirmed substantial environmental benefits, establishing B10 as the most balanced blend for optimized engine performance and minimized pollutant emissions. This research paves the way for future developments in renewable biodiesel blends, offering advancements in fuel economy, cleaner combustion, and overall emission reductions, while addressing the increasing demand for sustainable energy sources.