Today, the world community is looking for fuel efficient and environmentally viable alternatives for many of the traditional energy conversion approaches. This development has further worked to increase the technical focus on conventional cycles for making them more optimum in terms of performance. Hence, the objective of this paper is to study the effect of ethanol-air equivalence ratio on the power output and the indicated thermal efficiency of an air standard Otto cycle. Optimization of the cycle has been performed for power output as well as for thermal efficiency with respect to compression ratio. The results show that the maximum power output, the optimal compression ratio corresponding to maximum power output point, the optimal compression ratio corresponding to maximum thermal efficiency point and the working range of the cycle first increase and then decrease as the equivalence ratio increases. The result obtained herein provides a guide to the performance evaluation and improvement for practical Otto engines.