The high utilization and exploitation of fossil fuel have adverse environmental impacts and efforts to overcome these problems are called for. One of the options is to replace fossil fuel with palm oil which has many similar characteristics with diesel fuel. However, palm oil has higher viscosity level than diesel oil which may cause imperfect atomization in the nozzle. As a result, a heater is needed to alter the viscosity of the palm oil to be comparable to diesel oil's. Integrating the heater system into the diesel generator set, a fuel flow regulator is required to verify the viscosity level according to the standard of diesel engine. This research aims to design and analyze the performance of a heater system application on a small-scale diesel generator set with palm oil and diesel oil mixture fuel. The methods used are designing a system that is consisted of a fuel heater, a fuel flow regulator, and several supporting components based on literature study and measuring performance indicator of the integrated heater system and diesel generator under several conditions set for the experiments. From this study can be concluded that the diesel generator set operates under certain conditions such as up to 70oC fuel temperature and 50% CPO concentration in the fuel mixture. Implementation of this system produces electrical power and noise level similar to diesel fuel output. The fuel consumption and the exhaust gas temperature with palm-diesel oil mixture are higher than diesel input since palm oil has lower calorific value. The analysis of system's performance will be a valuable reference for future technological development.