In this study the performance, emission and economic evaluation of using the clove stem oil (CSO)–diesel blended fuels as alternative fuels for diesel engine have been carried out. Experiments were performed to evaluate the impact of the CSO–diesel blended fuels on the engine performance and emissions. The societal life cycle cost (LCC) was chosen as an important indicator for comparing alternative fuel operating modes. The LCC using the pure diesel fuel, 25% CSO and 50% CSO–diesel blended fuels in diesel engine are analysed. These costs include the vehicle first cost, fuel cost and exhaust emissions cost. A complete macroeconomic assessment of the effect of introducing the CSO–diesel blended fuels to the diesel engine is not included in the study. Engine tests show that performance parameters of the CSO–diesel blended fuels do not differ greatly from those of the pure diesel fuel. Slight power losses, combined with an increase in fuel consumption, were experienced with the CSO–diesel blended fuels. This is due to the low heating value of the CSO–diesel blended fuels. Emissions of CO and HC are low for the CSO–diesel blended fuels. NOx emissions were increased remarkably when the engine was fuelled with the 50% CSO–diesel blended fuel operation mode. A remarkable reduction in the exhaust smoke emissions can be achieved when operating on the CSO–diesel blended fuels. Based on the LCC analysis, the CSO–diesel blended fuels would not be competitive with the pure diesel fuel, even though the environmental impact of emission is valued monetarily. This is due to the high price of the CSO.