This paper presents the production, characterization and possible utilization of a bio-oil obtained from Mahua oilseed, which is potentially available in India. Pyrolysis was carried out between 450 °C and 600 °C under semi-batch type reactor for the production of Mahua pyrolysis oil (MPO). The yield of the MPO was found to be about 50% at an optimum temperature of 525 °C. The MPO was also characterized for its suitability of using it as an alternative fuel for internal combustion engines. The combustion, performance, and emission behavior of the diesel engine operated with the different MPO-diesel blends were assessed and compared with those of diesel operation at different loads. The results indicated that the engine thermal efficiency was dropped by about 2% for MPO-diesel operation from no load to full load operation in comparison to diesel. As the MPO-diesel blend ratio increases, the NO emission decreases from 4.5 to 2.8%, and the smoke emission increased from 10 to 75% from no load to full load respectively. From the obtained results, it is suggested that the 30% MPO blend can be considered as a potential candidate to be used as a fuel in compression ignition engines.