The use of low-carbon and zero-carbon alternative fuels on marine engine is the main measure to achieve carbon neutrality for shipping sector, thus attracting numerous research on fuel techno-economics, fuel safety and fuel production chains. However, among the factors that determine whether a fuel can finally be successfully marketed, the thermal efficiency of the fuel is very important as one of the cores in determining the operation cost. To evaluate the thermal efficiency of marine alternative fuels, a new theoretical engine cycle, Miller–Sabathe cycle, is proposed to identify thermal efficiency optimization potential of fuels under certain constraints. The Miller–Sabathe cycle can simultaneously optimize the combustion process and gas exchange process, offering a more comprehensive comparison of fuel thermal efficiency. Compared with technologies based on specific engine design or operation conditions, the Miller–Sabathe cycle analysis provides broader thermal efficiency optimization guidance, and is easy to generalize to different types of engines under different operating conditions. Based on the Miller–Sabathe cycle, a zero-dimensional model is built to further consider the influence of actual losses on thermal efficiency. Then the brake thermal efficiency of various alternative fuels under the Miller–Sabathe cycle is compared using a marine two-stroke diesel engine specifications. The theoretical Miller–Sabathe cycle analysis results shows that under a certain Miller cycle strength and an appropriate ratio of constant volume combustion, the maximum thermal efficiency is capable to increase to 71.17%. The results of 0-D model suggests that the brake thermal efficiency of the marine diesel engine is capable to reach 53.09% by balancing the power performance and actual losses. At last, the results of the alternative fuels calculation suggests that among several alternative fuels, the overall thermal efficiency of ammonia has significant advantages, which makes it a very economical zero-carbon fuel. These ...