Abstarct: The increasing global demand for fossil fuel and limited resource of these fuels have made countries to look for alternative fuels which can be produced from renewable resources. This resources must be locally available within the countries such as alcohol, biodiesel, vegetable oils and etc. Ethanol is also an attractive fuel because it is a renewable bio-baxsed resource and produced from easte and cheap materials. In this study utilization of ethanol blends with diesel fuel in direct injection (DI) diesel engine are discussed. Analysis of acquired data from in-cylinder pressure and heat release data are two general methods for investigating combustion in DI diesel engine. However, this method do not provide any useful information about engine output and fuel performance. In this research an experimental study is conducted to evaluate energetic and exergetic efficiency of a DI diesel engine. The engine is fueled by blend of ethanol with conventional diesel fuel, with 0-40% ethanol (by volume), respectively. The test is conducted using each of the above fuel blends, with the engine working at a speed of 1500rpm and at four different loads. Calculating the efficiency requires to calculate the total released heat in combustion process. The purpose of this study is to calculate the total released heat by integrating the net rate of heat release over combustion process period. This method is more accurate than previous methods that used combustion reaction equations to calculate total released heat. Net rate of heat release is calculated from in cylinder pressure and volume data which are obtained from experimental data. The start and end point of combustion are obtained from net rate of heat release and mass fraction burned data. The difference between performance and efficiency of diesel engine compared to the baxseline situation, i.e., when working with neat diesel fuel, is reported. The results show that the exergy and energy efficiency for 10&20% ethanol blends are in the highest level. But neat diesel fuel has better result in compare to 30&40% ethanol blends. Also performance of engine with 0-20% ethanol blends is better than 30&40% ethanol blends in combustion because of less noise and knock. On the other hand, in 30&40% ethanol blends, combustion start very soon and resonance is very high.