This research work has been formulated to study the characteristics of a diesel engine, with insulated engine components, fueled by kapok methyl ester (KME). The assertion to reduce heat loss and convert most of the energy rendered by the burnt fuel into useful piston work for a diesel engine with coated engine components has been capitalized. As such, in the current work, partially stabilized zirconia (PSZ), a pertinent coating material in respect of its poor thermal conductivity and better durability, has been chosen as the coating material to be applied on engine components by plasma spray coating. Further, this research work has attributed to harness the renewable source of energy from in-edible kapok oil, which has not grabbed the attention as a viable substitute for diesel amid the contemporary inedible feedstock’s, and synthesize biodiesel from it. Notably, steam distillation process followed by crushing of the seeds in a mechanical expeller was done in this work to extract large quantities of kapok oil for the application of diesel engines, which has not been brought to fore thus far. Apparently, the conventional trans-esterification process was availed to synthesize KME and the physical and thermal properties of it are estimated by ASTM standards. Subsequently, blends of KME with diesel such as B25, B50, B75 and B100 were prepared and tested in a single cylinder diesel engine with and without thermal barrier coating. Basic experimentation of KME blends without coating revealed B25 blend to be in agreement with diesel in aspect of performance, combustion and emission characteristics. As an outcome of the coating study, the blends of KME with coating were found to show improved BTE (brake thermal efficiency) and peak heat release rate. Further, the major emissions such as HC, CO and smoke were reported to be 14.7%, 36.1% and 13.8% lower for B50 with coating than without coating at the expense of slightly increased NOX emission.