The present study investigates the effect of blending oxygenate namely diethylene glycol dimethyl ether (diglyme) with minor vegetable oil namely rubber seed oil (RSO), babassu oil (BSO), and their blends in various proportions (R75B25, R50B50, and R25B75) on NOx-smoke trade-off and other engine characteristics. The tests were conducted on a commercial twin cylinder compression–ignition (CI) engine commonly used in tractors. The potential of the blends with diglyme is assessed based on performance, emission, and combustion characteristics of the engine at different load conditions. The tests were conducted at a constant speed of 1500 rpm maintaining the original injection timing and pressure. Compared to diesel, RSO, and BSO, and their blends exhibited inferior combustion due to poor physical properties like high viscosity and density. This resulted in a lower brake thermal efficiency with increase in HC, CO, and smoke emissions compared to diesel at all the load conditions. The augmented effect is observed with increase in BSO proportion for the blends and neat BSO. The poor combustion of minor vegetable oil and its blends lead to lower NOx emission as a result of lower in-cylinder temperature. To improve the performance and NOx-smoke trade-off, diglyme (DGM) was added with all the test fuels with the optimum share of 20% (by volume). Addition of DGM, increased brake thermal efficiency by 2–7% for all the test fuels due to improved combustion as a result of additional fuel bound oxygen in DGM and improved fuel blend properties. DGM addition reduced smoke, HC, and CO emission drastically with a slight increase in NOx emission compared to minor vegetable oil blends. The study shows that addition of DGM showed a promising note in NOx-smoke trade-off without affecting the other engine parameters.