Although diffusion flame is free from many problems associated with premixed flame, soot formation is a major problem in diffusion flame. The techniques of dilution of fuel or air with inert gases such as nitrogen and argon are used to decrease soot level in the flame. In this work, a CFD code has been developed to predict the flame height, soot volume fraction and soot number density in an axisymmetric laminar confined methane-air diffusion flame after diluting the fuel with nitrogen. The temperatures of the air and fuel at inlet are taken as 300K. Mass flow rate of the fuel stream is considered as 3.71x10(-6) kg/s and mass flow rate of the air is taken as 2.2104x10(-6) kg/s. The total mass flow rate through the central jet (fuel jet) is, however, kept constant. The radiation effect is also included through an optically thin radiation model. An explicit finite difference technique has been adopted for the numerical solution of reacting flow and two equations soot model with variable thermodynamic and transport properties. The prediction shows that flame height decreases with the addition of nitrogen to the fuel. Temperature of the flame is considerably reduced in the given computational domain. Both soot volume fraction and soot number density decrease with dilution by adding nitrogen in the fuel jet. The soot formation at different nitrogen dilution level of 0%, 10%, 20%, 30%, 40% and 50% are plotted and the soot get considerably reduced as the concentration of nitrogen is increased in the fuel stream.