This study explores the feasibility of using a sustainable lignin-based fuel, consisting of 44 % lignin, 50 % ethanol, and 6 % water, in conventional compression ignition (CI) marine engines. Through experimental evaluations on a modified small-bore CI engine, we identified the primary challenges associated with lignin-based fuel, including engine startup and shutdown issues due to solvent evaporation and lignin solidification inside the fuel system, and deposit formation on cylinder walls leading to piston ring seizure. To address these issues, we developed a fuel switching system transitioning from lignin-based fuel to cleaning fuel with 85 vol% of acetone, 10 vol% of water and 5 vol% of ignition improving additive, effectively preventing system clogs. Additionally, optimizing injection parameters, adopting a constant pressure delivery valve, and fine-tuning injection timing mitigated lignin deposit formation related to incomplete combustion or spray tip penetration to the cylinder wall. The successful combustion of the lignin-based fuel in the small-bored CI engine was confirmed in a wide range of chamber temperatures. The ignition delay was measured and analyzed using Arrhenius equation. The ignition quality of the lignin fuel was comparable with 1-pentanol with a cetane number of 18.2, which is acceptable for 2-stroke marine engines. Although further investigation is needed to assess long-term reliability, our findings underscore the potential of lignin-based fuel as a viable alternative fuel for marine engines.