Direct use of naphtha in compression ignition (CI) engines is not advisable because its lower cetane number negatively impacts the auto ignition process. However, engine or fuel modifications can be made to operate naphtha in CI engines. Enhancing a fuel’s auto ignition characteristics presents an opportunity to use low cetane fuel, naphtha, in CI engines. In this research, Di-ethyl ether (DEE) derived from ethanol is used as an ignition enhancer for light naphtha. With this fuel modification, a “drop-in” fuel that is interchangeable with existing diesel fuel has been created. The ignition characteristics of DEE blended naphtha were studied in an ignition quality tester (IQT); the measured ignition delay time (IDT) for pure naphtha was 6.9 ms. When DEE was added to naphtha, IDT decreased and D30 (30% DEE + 70% naphtha) showed comparable IDT with US NO.2 diesel. The derived cetane number (DCN) of naphtha, D10 (10% DEE + 90% naphtha), D20% DEE + 80% naphtha) and D30 were measured to be 31, 37, 40 and 49, respectively. The addition of 30% DEE in naphtha achieved a DCN equivalent to US NO.2 diesel. Subsequent experiments in a CI engine exhibited longer ignition delay for naphtha compared to diesel. The peak in-cylinder pressure is higher for naphtha than diesel and other tested fuels. When DEE was added to naphtha, the ignition delay shortened and peak in-cylinder pressure is reduced. A 3.7% increase in peak in-cylinder pressure was observed for naphtha compared to US NO.2 diesel, while D30 showed comparable results with diesel. The pressure rise rate dropped with the addition of DEE to naphtha, thereby reducing the ringing intensity. Naphtha exhibited a peak heat release rate of 280 kJ/m3deg, while D30 showed a comparable peak heat release rate to US NO.2 diesel. The amount of energy released during the premixed combustion phase decreased with the increase of DEE in naphtha. Thus, this study demonstrates the suitability of DEE blended naphtha mixtures as a “drop-in” replacement fuel for diesel.