This work investigates the effect of thermal barrier coating and addition of cerium oxide nanoparticles to the palm biodiesel fuelled diesel engine. The combustion chamber parts of cylinder liner and piston were coated 200 and 100 micron thickness respectively using equal percentages of Yittria Stabilised Zirconia (YSZ) and alumina powder in plasma spraying technique. The 30 ppm and 60 ppm of cerium oxide (IV) nanoparicles were added to the palm biodiesel fuel separately. The performance and pollution parameters were analysed initially using a thermal barrier coated (TBC) engine with neat palm biodiesel. Cerium oxide (IV) nanoparticles were then added to the palm biodiesel and their effects were compared with the base engine. The final performance results showed reduction in the specific fuel consumption on an average of 11.86%, 16.92% and 20.57%, while brake thermal efficiency was increased by 3.21%, 4.28% and 4.82% in neat palm biodiesel fuel, 30 ppm and 60 ppm CeO2 mixed palm biodiesel fuel used thermal barrier coated engine respectively. Carbon monoxide and unburned hydrocarbon emission were reduced by 2.2% and 3.7% and nitrogen oxide emission was increased by 1.7% for thermal barrier coated engine. However, the use of oxygen denoting catalyst of cerium oxide nanoparticles caused a 2.4% reduction in nitrogen oxide emission.