This study identifies the use of processed lateritic fine aggregate (LFA) as a sustainable material for the replacement of natural fine aggregate (NFA) in self-compacting concrete (SCC). Cubes were cast with LFA replacements from 10% to 80% with an interval of 10% for checking the compressive strength development at 28 and 90 days. The findings demonstrate that the replacement of 30% NFA with LFA leads to the optimum performance, resulting in compressive strengths of 45.5 MPa and 53 MPa after 28 and 90 days of curing. Similar trends are also noted with the specimens cast for splitting tensile and flexural strengths as per IS 516: 2021. Scanning electron microscopy (SEM), energy-dispersive X-ray spectroscopy (EDX), Thermogravimetric analysis (TGA), and Fourier Transform Infrared Spectroscopy (FTIR) were performed to understand the surface morphology, material characterization, and composition differences between the control mix (C30F) and optimized lateritic SCC (C30F30L). SEM and EDX analysis demonstrated the contribution of the introduced fly ash particles to the strengthening of concrete. TGA with DTA has shown the more complicated denser structure of the C30F mix, and FTIR has confirmed the presence and formation of the C-S-H gel. Si-O-Si asymmetric stretching band has extra peaks, and with FTIR, O-C-O asymmetrical bending and stretching wave band have a lower intensity than the C30F mix due to the partial replacement of LFA. In addition, it is also observed from the durability studies that C30F30L showed an increase in pore volume and capillary pore network compared to C30F mix.