Aquaculture is a rapidly growing sector, with tilapia production making a significant contribution to global food security. However, the industry faces challenges with feed sustainability because it relies on fishmeal and soybean meal, which are costly and environmentally unsustainable. Defatted Algae Cake (DAC), a protein-rich byproduct of microalgae biofuel production, presents a promising alternative feed ingredient. This study evaluated the impact of DAC inclusion in farmed tilapia diets on growth performance, feed utilization, health parameters, and water quality under field conditions. Four diets were tested: a control diet (0% DAC), a low DAC inclusion diet (3%), a medium DAC inclusion diet (10%), and a high DAC inclusion diet (20%). Results demonstrated that the 3% DAC inclusion diet achieved the highest growth performance, weight gain, and feed efficiency, with a feed conversion ratio (FCR) of 1.17, outperforming the control and DAC diets. Histopathological analysis revealed improved intestinal structure with 3% DAC inclusion, thereby enhancing nutrient absorption. However, higher inclusion levels led to mild inflammatory responses and reduced growth performance. Water quality parameters, including dissolved oxygen, ammonia, and nitrite levels, remained within optimal ranges across all treatments, indicating that lower DAC compositions did not negatively affect the aquatic environment. Additionally, hematological analysis showed stable immune responses, and microbiological and heavy metal tests confirmed the safety of DAC-containing feed for fish and the environment. The economic evaluation revealed that DAC inclusion reduced feed costs, with the 3% DAC diet offering the most favorable profit index. These findings suggest that DAC at 3% inclusion in feed is a safe, cost-effective, and sustainable feed ingredient that can enhance growth performance and support environmentally friendly aquaculture practices.