In this study, the cottonseed as a potential renewable source for producing surrogate bio-fuel is elaborated. Indeed, this study included two stages, in which the extraction of the bio-oil from cottonseed through the intermediate pyrolysis process in a fixed-bed reactor was presented in the first stage. Furthermore, produced bio-oil has shown their physicochemical properties suitable for engine application. In the second stage, the analysis of performance (including brake thermal efficiency, brake-specific fuel consumption) and emission characteristics (including nitrogen oxides, carbon dioxide, unburnt hydrocarbon, carbon monoxide, and smoke opacity) of a water-cooled, 4-stroke, 1-cylinder diesel engine fueled with blends of bio-oil/diesel fuel in the case of changing compression ratio and engine load were carried out. More importantly, the response surface method technique was applied to optimize the operational parameters of the test engine. In conclusion, the validation experiments were performed to ensure the reliability of the obtained optimized results, indicating that the test engine operated with 5% bio-oil blended with 95% diesel fuel, a compression ratio of 18:1, and at 50% of engine load could offer the best performance and emission characteristics with a desirability factor of 0.617 and an error < 5% for the validated parameters.