Exhaust gas recirculation (EGR) has been widely applied on marine low-speed engine for the Tier III standard. However, few studies focus on energy and exergy analysis to improve the deterioration of fuel economy caused by EGR. This study fills in this gap based on the related experiment. Results show that about 35% EGR rate could achieve the Tier III standard, while cylinder bypass (CB) may raise NOx due to the coupling of CB and exhaust receiver. Subsequent energy analysis shows that improving fuel consumption should start with reducing the energy of heat transfer and exhaust gas. But, the exergy analysis indicates that reducing the irreversibility will be more efficient. The irreversibility mainly comes from in-cylinder, turbocharger and intercoolers. According to the instantaneous in-cylinder exergy analysis, the corresponding irreversibility is due to charge mixing and combustion. Reducing temperature gradient and proportion of premixed combustion are effective methods to inhibit it. EGR has opposite impacts on in-cylinder irreversibility caused by combustion: it enhances this irreversibility by rising maximum temperature and prolonging combustion duration (25% load); but it also raises the proportion of premixed combustion, which will inhibit this irreversibility (100% and 75% load). As for the irreversibility from turbocharger, it is negatively correlated with EGR rate, because of CB reducing exhaust temperature. Whereas, due to the existence of EGR intercooler, the irreversibility caused by intercoolers are positively related with EGR rate.