Marine diesel engines are one of the most representative fossil fuels consumers on the planet. These engines are responsible for a large amount of air pollutants, including greenhouse gas emissions. This concern led to the adoption of new regulations and policies for shipping, which involved more intensive restrictions for airborne emissions. This scenario, in addition to the finite fossil fuel reserves, the fluctuating price of fossil fuel and its share of the annual costs of ships, has boosted the development of new alternative fuels for marine diesel engines from traditional ones. It is known that waste oils are one of the most abundant residues generated within the industry. This study assesses the technical suitability of an alternative fuel oil, obtained from recycled waste automotive lube oil, in comparison with traditional fuels, complying with the ISO 8217 for distillate fuel oils. The alternative fuel was tested on a full scale marine diesel engine test bench, simulating real operating conditions for marine diesel engines and electric diesel generators in steady loads. To this end, the engine was cooled with sea water and coupled to a hydraulic brake, which allowed tests to be undertaken in different engine loads and propulsion modes, such as controllable and fixed pitch propeller propulsion systems. The results demonstrated that the alternative fuel burns rapidly but with a delay at the end of combustion, which should be expected for this type of fuel. Additionally, the energy efficiency of the diesel engine is comparable to the distillate fuel commonly used by the fishing fleet; however, due to its higher heating value, the alternative fuel presents lower fuel consumption. According to the emissions, the alternative fuel exhibits lower NOx and CO2 emission levels but slightly higher CO emissions and smoke opacity levels than common fuels, with the sulphur content in the fuel below the maximum level being allowable by more stringent marine rules. Hence, waste oil-based alternative fuel oils are acceptable for use in marine diesel engines operated on-board a ship under real conditions and meet the rules applicable to marine environments for burning fuel oils.