Lubricant (lube) oil discharge from ships has been widely considered as normal “operational consumption”, but is now deemed to be oil pollution. Despite the chronic contamination of the marine environment by lube oil, the number of studies related to its environmental impact, characteristics, and toxicity is limited. This study is the first attempt to investigate the environmental fate of lube oil subjected to photooxidation using in situ mesocosms. A tiered approach using thin-layer chromatography–flame ionization detection (TLC–FID), Fourier-transform infrared spectroscopy (FTIR) and gas chromatography–mass spectrometry (GC–MS) demonstrated compositional changes in lube oil and the water-soluble fraction (WSF). Total polycyclic aromatic hydrocarbons (ΣPAHs) in lube oil after 96 h of photooxidation were measured at 79.8 and 41 μg/g in the control (Con) and exposure (Exp) groups, respectively. Meanwhile, the ΣPAHs concentration in WSF after 96 h was very low, at 0.25 and 0.45 μg/L in Con and Exp, respectively. FTIR and GC–MS helped identify bond changes and photoproducts in WSF. A wide range of photoproducts, including carboxylic acids, esters, anhydrides, aldehydes and ketones, were identified in WSF. Toxic effects of WSF in both the Con and Exp groups obtained after 96 h of photooxidation were evaluated on olive flounder (Paralichthys olivaceus) embryos. Morphological defects, especially tail fin fold defects, were found to be significantly elevated in both the Con and Exp groups, with marginally higher frequency in Exp. The results of this study demonstrate the need for further research on lube oil weathering, including monitoring over prolonged periods of time.