To measure the effects of dietary fat on feedlot performance and carcass characteristics, and on beef appearance, moisture binding, shelf life, palatability, and fatty acid content, 126 crossbred beef steers (321.1 +/- 0.57 kg of BW) were allotted to a randomized complete block (3) design with a 3 x 2 + 1 factorial arrangement of dietary treatments. The main effects were level of yellow grease (0, 3, or 6%) and alfalfa hay (3.5 or 7%) in corn-based diets containing 15% potato by-product (PB). The added treatment was 6% tallow and 7% alfalfa in a barley-based diet containing 15% PB. Dry matter intake and ADG were not affected by diet; however, G:F and diet NE content increased linearly (P < 0.10) with yellow grease. Kidney, pelvic, and heart fat (2.0 to 2.3 +/- 0.07) and yield grade (2.8 to 3.1 +/- 0.09) increased linearly (P < or = 0.05) with yellow grease. Steers fed corn plus 6% yellow grease had lower (P < 0.05) beef firmness and beef texture scores but greater (P < 0.01) fat color score than those fed barley plus 6% tallow. Moisture retention of beef was not affected by dietary treatment, except purge score during retail storage, which was decreased linearly (P < 0.01) from 2.1 to 1.6 +/- 0.06 by level of yellow grease. Steaks from steers fed barley plus 6% tallow had greater (P < 0.05) shear force than those from steers fed corn plus 6% yellow grease, and beef flavor increased linearly (P < 0.05) from 6.2 to 6.7 +/- 0.11 as the level of yellow grease increased. Level of yellow grease linearly increased (P < 0.01) transvaccenic acid (TVA) by 61% and CLA content of beef by 48%. Beef from steers fed corn plus yellow grease had lower (P < 0.05) palmitoleic and oleic acids and greater (P < 0.05) linoleic, TVA, and CLA than beef from steers fed the barley-tallow diet. Feeding yellow grease increased diet energy content, which increased carcass fatness, and altered beef fatty acid content, which increased beef flavor without affecting moisture retention, shelf life, or cooking properties of the beef. Additionally, beef from steers fed corn plus 6% yellow grease was more tender and had more polyunsaturated fatty acid content and CLA than beef from steers fed barley plus 6% tallow.