Worldwide, there is a growing interest in the use of diesel-ethanol blends in compression ignition engines as a way to reduce vehicle emissions and use alternative fuels. The previous studies with the focus on the reduction of emission and the improvement of performance for compression ignition engine using ethanol shows that the combustion characteristics should not be missed. In this paper, the effect of ethanol content on combustion properties of diesel engine fueled with diesel-ethanol blends using two phase combustion model (combustion model of premixed -diffusion combustion) of the virtual engine simulation tool GT-SUITE was investigated. For the purpose of the study, the engine simulation tool was used to compare the Computed data with the benchmark data for the variation of ethanol content (0-40%) and to analyze the characteristics of auto-ignition, premixed combustion and diffusion combustion. The simulation results of combustion characteristics using diesel-ethanol blend showed that the auto-ignition delay increased and the premixed combustion ratio increased. The results of the study showed that the combustion model of premixed combustion -diffusion combustion can be used to perform combustion characteristics and performance analysis in a compression ignition engine using ethanol-diesel blend and to estimate the ethanol content to achieve the desired working performances.