Proteins are essential constituents of animal feeds, which comprise mainly vegetable protein (e.g., soybean meal), which is produced and transported globally. The decoupling of protein-production and livestock-growth areas results in protein deficiencies in certain parts of the world, and in significant environmental stress. Alternative, more sustainable protein feeds are necessary to meet the increasing needs, and to decrease the environmental footprint of animal products. Yeast Single Cell Proteins (SCP), produced locally using various agro-industrial by-product streams, have significant potential as alternative animal feed protein. Particularly, Yarrowia lipolytica, an oleaginous, non-pathogenic microorganism has been characterized as a “workhorse” in biotechnological studies, drawing the attention of many researchers. The present review summarizes available resources on critical issues concerning the applicability and commercialization of Yarrowia lipolytica as an environment-friendly protein source for animal feed. It discusses the sustainability of the yeast SCP production process, it presents the recent advances concerning Yarrowia lipolytica cultivation on low-cost agro-industrial by-products, and it stresses the effects on the health and welfare of productive animals due to the inclusion of Yarrowia lipolytica in their diet. The data presented in this study should facilitate relative research advancement and the commercialization of Yarrowia lipolytica’s use as an alternative protein source/supplement for animal feeds.