To measure the effects of dietary fat on feedlot performance, carcass characteristics, and beef appearance, moisture binding, shelf life, and palatability, 168 crossbred beef steers (317 +/- 1.0 kg) were allotted randomly, within weight blocks, to a randomized complete block design with a 3 x2 + 1 factorial arrangement of dietary treatments. Main effects were level of yellow restaurant grease (RG; 0, 3, or 6%) and level of alfalfa hay (AH; 3.5 or 7%), with the added treatment of 6% tallow and 7% AH in barley-based diets containing 15% potato by-product and 7% supplement fed for 165 d (all dietary levels on a DM basis). Dietary treatment did not (P >0.10) affect DMI, LM area, beef brightness, or beef texture. Level of RG linearly increased (P <0.05) ADG from 1.48 to 1.60 kg/d, diet NE(m) from 2.4 to 2.6 Mcal/kg, diet NE(g) from 1.7 to 1.9 Mcal/kg, and internal fat from 2.1 to 2.4%. Level of RG linearly increased (P <0.05) G:F from 0.184 to 0.202, but decreased (P <0.05) beef firmness score from 3.0 to 2.8 and fat luster score from 3.1 to 2.8. Level of AH did not (P >0.10) affect any of the measurements; however, AH interacted with level of RG on fat thickness and yield grade (linear; P <0.05), as well as marbling score and percentage of carcasses grading USDA Choice (quadratic; P <0.05). Fat thickness and yield grade increased with increasing RG level in 3.5%, but not in 7%, AH diets. In steers fed 3.5% RG, marbling scores and percentage of carcasses grading Choice were greatest when fed with 3.5% AH, and least when fed 7% AH. Steers fed tallow had lower marbling scores (P = 0.01) and percentage of carcasses grading Choice (P = 0.066) than those fed RG. Retail storage attributes, including visual and instrumental color, decreased during storage (P <0.01), but were not (P >0.10) affected by diet. Trained sensory panel scores for initial tenderness increased quadratically (P = 0.07) as dietary RG increased, but diet did not (P >0.10) affect drip loss, cooking loss, or trained sensory panel scores for sustained tenderness, initial and sustained juiciness, and beef flavor. Therefore, RG increased diet energy, improved performance, and increased carcass fatness; however, dietary fat and AH did not affect most measurements of water retention, color stability, or palatability of beef.