Due to combination of factors, such as environmental concerns, high oil prices and the potential for peak oil, development of cleaner alternative fuels and advanced power systems for vehicles has become a high priority for many governments and vehicle manufacturers around the world. Use of Gasoline as an alternative fuel in Gasoline engine is becoming a need, looking at the scarcity of petroleum fuels in near future. This paper investigates the influence of compression ratio and ethanol-gasoline blending to find the effects on four-stroke SI engine performance. In this research, air cooled engine having compression ratio of 9.1 & 9.7 is used. Fuel blend E50 is used in the study and engine operated at a speed range of 600-1100 rpm. Maximum power was obtained for E50 fuel at a compression ratio of 9.1, while, a minimum fuel consumption rate was obtained at a compression ratio of 9.7. This clearly depicts that as compression ratio increases, fuel consumption rate decreases considerably. Further, experimental results showed that comparing several blends, 50% ethanol is cost and power effective for the four-stroke SI engine