Methanol (CH₃OH) is an alcohol that can be used as an alternative fuel in the form of a blend with petroleum fuel or on itself. Methanol is not to be mistaken with ethanol (C₂H₅OH), which can also be used as an alternative fuel. Methanol fuel is mostly produced by catalytic oxidation of methane from natural gas to form methanol, which is then converted to dimethyl ether (DME), which can be used as a diesel fuel. DME does require an entirely new and rather complex fuel injection system. Commercial engines for DME are not available at this moment.

Methanol fuel is used in internal combustion engines in pure form or in a mixture with gasoline or diesel. Pure methanol is used in many different race car competitions due to its increased thermal efficiency, low cost and low risk of flammability. It also does not create an opaque smoke when on fire, unlike diesel or gasoline. The combustion of pure methanol has no nitrogen oxide (NOx) emissions, no sulpher oxide (SOx) emissions and very low particulate matter (PM) and carbon dioxide (CO2) emissions compared to gasoline or diesel. A mixture of methanol and petroleum fuel will result in lower emissions than regular petroleum fuel. Methanol fuel is toxic, but it does not evaporate as quickly as petroleum fuel and it also can be extinguished with water.

The Stena Germanica is the first major vessel to be powered by a methanol mixture and is a ferry between Gothenburg, Sweden and Kiel, Germany. In 2015 the Stena Germanica was retrofitted to be powered by a dual fuel engines (95% methanol, 5% MGO) to comply with emission regulations.

It is possible to retrofit a diesel engine to use a methanol diesel mixture, but there is a low demand for methanol fuel and therefore it is not available at bunkering stations.