This paper aims at studying the combined effect of oxygen enrichment and dual fueling on performance, emission, and combustion characteristics of a mono cylinder diesel engine using a blend of cashew nut shell pyro oil (CSO) and conventional diesel oil (called BD—base diesel) as fuel. Experiments were initially conducted using 100% BD as fuel at variable power output conditions. Subsequently, experiments were repeated with CSO40D60 (blend of 40% of CSO and 60% of BD by volume) at different power outputs. In the third phase, the engine was run with oxygen enrichment of 24% by volume in the intake air using CSO40D60 as fuel. Finally, the engine was operated in dual fuel mode of operation with the oxygen concentrations of 24% using CSO40D60 as pilot fuel and ethanol as the primary inducted fuel. Ethanol induction was made up to the maximum possible limit until misfire or knock. The brake thermal efficiency (BTE) was found as 25% with CSO40D60 29.5% and 30.5% with BD at the rated power output of 3.7 kW. The smoke number was noted as 55 filter smoke number (FSN) and 40 FSN, respectively, with CSO40D60 and BD. Hydrocarbon (HC) and carbon monoxide (CO) emissions were found to be higher with CSO40D60 as compared to BD. Ignition delay (ID) and combustion duration (CD) were also noted to be higher with CSO40D60 at all power outputs. Combined oxygen enrichment and ethanol induction sufficiently increased the BTE using CSO40D60 as fuel at all power outputs. At peak power output, the BTE was noted as 34.5%. The lowest smoke number of 36 FSN was found for 24% of oxygen with 34.3% of ethanol energy share at peak power output with CSO40D60 as fuel, whereas it was 40 FSN with BD and 55 FSN with CSO40D60 for 21% of oxygen. Significant improvement in heat release rates was observed by combining ethanol induction and oxygen enrichment techniques using CSO40D60 as fuel. Overall, it is concluded that by combining oxygen enrichment and ethanol induction superior performance and reduced emissions can be achieved at all power outputs using CSO40D60 as fuel.