This study aims to investigate the impact of methane on performance and emission characteristics of diesel engine fueled by bio diesel. A combined chemical reaction model was developed including the reaction kinetics of bio diesel and methane with CO, NOX and soot formation mechanisms embedded. The developed skeletal reaction mechanism was first validated by performing ignition delay calculations against the detailed bio diesel reaction mechanism, then it was subject to 3D numerical simulations of combustion process in a diesel engine against the experimental results under various operating conditions, good agreement has been obtained. After the validation, it was used to investigate the effect of different methane percentage on the performance of the engine. The results indicate that under various engine load conditions, with the increase of methane addition, both CO and soot emissions are significantly reduced with negligible NOX emission change.