The utilization of bio-oil derived from biomass presents a promising alternative to fossil fuels, though it faces challenges when directly applied in diesel engines. Microemulsification has emerged as a viable strategy to enhance bio-oil properties, facilitating its use in hybrid fuels. This study explores the microemulsification of Jatropha bio-oil with ethanol, aided by a surfactant, to formulate a hybrid liquid fuel. Additionally, a bio-nano CaO heterogeneous catalyst synthesized from eggshells is employed to catalyse the production of Jatropha biodiesel from the microemulsified fuel using microwave irradiation. The catalyst is characterized through UV-Vis, XRD, and SEM analysis. The investigation reveals a significant reduction in CO, CO2, and NOX emissions with the utilization of microemulsion-based biodiesel blends. Various blends of conventional diesel, Jatropha biodiesel, and ethanol are prepared with different ethanol concentrations (5, 10, and 20 wt%). Engine performance parameters, including fuel consumption, NOX emission, and brake specific fuel consumption, are analyzed. Results indicate that the conventional diesel/Jatropha biodiesel/ethanol (10 wt%) blend exhibits superior performance compared to conventional diesel, Jatropha biodiesel, and other blends. The fuel consumption of the conventional diesel/Jatropha biodiesel/ethanol (10 wt%) blend is measured at 554.6 g/h, surpassing that of conventional diesel and other biodiesel blends. The presence of water (0.14 %) in the blend reduces the heating value, consequently increasing the energy requirement. CO and CO2 emissions for the conventional diesel/Jatropha biodiesel/ethanol (10 wt%) blend are notably lower compared to conventional C-18 hydrocarbons and various biodiesel blends. These findings accentuate the efficacy of the microemulsion process in enhancing fuel characteristics and reducing emissions. Further investigations could explore optimizing the emulsifying agents and their impact on engine performance and emission characteristics, contributing to the advancement of sustainable fuel technologies.