Biodiesel makes an attractive option to replace fossil diesel owing to its applicability in diesel engines without major modifications. An increase in NO emissions with biodiesel compared to diesel is a major concern for its wider use. Blending alcohols, such as methanol, with biodiesel is a potential remedy to mitigate NO formation, as suggested by experiments. However, computational investigations studying the effect of biodiesel-methanol blends on NO formation are scarce. A combined experimental and computational approach is adopted here to investigate the NO formation mechanism with neat biodiesel and biodiesel-methanol blend fueled light duty diesel engine. Firstly, a new compact kinetic model is utilized consisting of oxidation reactions for methyl butanoate and n-dodecane as a surrogate for biodiesel. A surrogate is defined to represent biodiesel based on a combined property and functional group based approach. This kinetic scheme is comprehensively validated for its component kinetics and available fundamental combustion experiments for biodiesel. Later, the suitability of the surrogate and the associated kinetic model is examined at engine conditions by comparing the predicted 3D CFD engine simulations with experiments for combustion and emission characteristics of neat biodiesel. The simulations performed using the surrogate show a good agreement with the experiments. Finally, a methanol sub-mechanism is incorporated in the biodiesel surrogate to investigate the effects of biodiesel-methanol blend. The addition of methanol causes minimal changes in the gross combustion parameters as shown by experiments as well as computations. However, it results in significant decrease in NO concentration, which is qualitatively captured by engine simulations. The computations provide additional insight into this effect providing a possible explanation for reduction in NO concentration with addition of methanol to biodiesel.