Diesel engines have become a vital component of modern transportation, but they are also associated with concerns regarding efficiency, emissions, and fuel consumption. Recent advancements have focused on improving diesel engine performance by exploring alternative fuel formulations and additives. One promising approach involves the use of binary mixtures of ionic liquids (ILs) and cyclic ethers, which have unique physicochemical properties that can influence combustion characteristics, fuel efficiency, and emissions. This paper reviews the role of molecular interactions in binary mixtures of ILs and cyclic ethers, specifically in relation to their effects on diesel engine performance. The interactions between ILs and cyclic ethers—such as ion-dipole interactions, hydrogen bonding, and solvation effects—can alter fuel properties such as viscosity, density, combustion behaviour, and lubricity. Understanding these interactions is crucial for the design of additives that can optimize fuel performance, reduce emissions, and improve engine efficiency. We also discuss how the compatibility of these mixtures with conventional diesel fuels can enhance fuel properties, leading to improved engine operation.