As an escalating global concern for environmentally sustainable marine fuels, liquefied petroleum gas (LPG) is attracting attention as an eco-friendly and economical alternative. This study explored LPG utilization in small marine vessels, focusing on its eco-friendliness and economic feasibility. To assess its environmental implications, the AVL FIRE simulation program was used to compare CO2, CO, NO, and soot emissions from LPG engines with those from conventional gasoline and diesel engines. The LPG engine model relied on data from a pioneering type-approved experimental LPG engine designed for small South Korean marine vessels, while parameters for gasoline and diesel engines were adjusted to suit their distinctive features. Regarding long-term economic feasibility, assuming a 30-year ship lifespan, incorporating 2022 annual average prices, average annual price growth rates, and annual fuel consumption data of each fuel, results indicate that LPG engines exhibited lower CO2, CO, NO, and soot emissions than conventional engines, except that NO emissions were higher than gasoline engines. Evaluating LPG’s economic feasibility over a 30-year ship life cycle for an individual vessel revealed varying fuel cost savings, with the greatest savings observed in gasoline–other (KRW 2220.7 million) and the least in gasoline–coastal (KRW 1152.5 million). These findings offer vital insights for ship operators and policymakers seeking a balance between eco-friendliness and cost-effectiveness, as well as LPG engine technology emerging as pivotal for a sustainable future, harmonizing environmental protection and economic viability.