In this study Karaya crude oil was converted to Biodiesel using two step transesterification reaction to reduce the free fatty acid and kinematic viscosity of crude oil. The produced biodiesel was identified using GC-MS techniques, the results shows that 96.83% of triglycerides were converted to biodiesel. Physical and chemical properties of Karaya biodiesel met the requirements of ASTM D 6751. B20 blend of biodiesel with Diesel met the requirements of ASTM D 7467. Biodiesel-Diesel-Ethanol blends were investigated and compared also with standard method ASTM D 7467 and had met all standard requirements except for Flash point. The flash point of pure biodiesel was 158ºC, reduced to 70 ºC in the B20 blend and reduced to 14 ºC, 16 ºC and 18 ºC in D60 B20 E20, D80 B10 E10 and D80 B15 E5 respectively.