Partial replacement of fossil fuels by biomass based alternative fuels is considered as a possible option for household applications. These are becoming a primary choice due to diminishing petroleum reserves and increasing air pollution. Partial substitution of kerosene with ethanol is beneficial for household applications. Kerosene is widely used for cooking and lighting for households and causes indoor air pollution. It is known that ethanol production in Ethiopian increase from time to time. Thus, it seems reasonable to use ethanol to substitute kerosene partially without any modification of wick stove and lamp. This thesis focuses on the blending of ethanol and kerosene for cooking and lighting application using household cooking stove and lamp respectively. Kerosene to ethanol ratio of E5, E10, E15, E20, E25, E30, E35, E40, E45, E50, and E55 were investigated and test their thermal efficiency using wick stove. The blending experiments were done by jar teste. Bomb calorimeter, Abel’s closed cup method, Flue gas analyzer, and indoor air pollution meter were used to measure calorific value, flash point, exhaust gases and indoor air pollution of blended fuels respectively. Fuel consumption rate and thermal efficiency of wick stove was determined based on water boiling test method. The results show that kerosene-ethanol blend fuels with E40 outperform for household applications. Because it meets indoor air quality guideline of WHO, and have less fuel consumption rate of lamp, compared to the reference fuel. The fuels for cooking, via wick stove had tasted and among the blending fuels E30 was selected, because it results high thermal efficiency of wick stove (41.23 %), less than reference fuel (44.15 %) , but its indoor air pollution analysis gives the values which meets air quality guideline of WHO of interim target (IT-1).