Depleting petroleum reserves on the earth and increasing concerns about the environment leads to the question for fuels which are eco-friendly safer for human beings. The objective of present work was to investigate the eflect of coating on piston, cylinder head, and valves on the performance of the engine and emission characteristics of exhaust gases using wet ethanol (5% water) as a fitel. A comparative study was carried out with the base engine for finding out ejfect of coating on engine components. The emission of NOX, HC and CO are recorded for constant speed mode and compared to that of base engine reading. The exhaust temperature is also recorded by using thermocouple. Because of the zirconia low thermal conductivity, high temperature resistance, chemical inertness, high resistance to erosion, corrosion and high strength, it is selected as a coating material for the engine components. For comparing the performance of the engine with coated components with the base engine, readings were taken before and afier coating. To make the diesel engine to work with ethanol a modification was done. The ethanol was sprayed in the inlet manifold and spark plug was erected on the engine head to facilitate the ignition. The engine ’s performance was studied for both wet ethanol and diesel with and without Zirconia coating. Also the emissions values are recorded to study the engine's behavior on emissions