<p>The urgency to develop an alternative fuel source has been heightened due to declining fossil fuel reserves, escalating fuel prices, and emissions from diesel engines. In recent times, the waste generated from the extensive production and consumption of plastic grocery bags (PGB) has emerged as an additional worldwide concern. Additionally, the utilization of plastic oil (PO) obtained from PGB has become increasingly popular in diesel engines due to its ability to tackle waste management and waste-to-energy concerns simultaneously; however, it has certain constraints with respect to elevated nitrogen oxide (NO_<i>x</i>) emissions. On the other hand, research examining the effects of combining ethanol with diesel and another alternative fuel source (tertiary blend) has demonstrated considerable promise. This present study addresses each of the aforementioned issues by conducting an exhaustive analysis on the effects of using ternary blends of PGB-derived PO–ethanol–diesel on the performance, and emission characteristics of the common rail direct injection compression ignition (CRDI CI) engine along with detailed combustion behavior. Five different blends were investigated, and the PO and ethanol contents were varied from 0 to 20% maintaining a total of 20% in the blend. The results of all the engine characteristics and non-dimensionalization of all the outputs emphasize that the D80P10E10 (80% diesel, 10% PGB-derived PO, and 10% ethanol) is the most suitable blend that produces a lower NO_<i>x</i> with a similar brake thermal efficiency (w.r.t diesel) and with a minimum penalty on other emissions.</p> Graphical Abstract <p></p>