Methanol has been identified as a transition fuel for the decarbonisation of combustion-based industries, including automotive and maritime. This study aims to conduct a critical review of methanol combustion in compression ignition engines and analyse the reviewed studies’ results to quantify methanol use’s impact on engine performance and emissions characteristics. The diesel and diesel–methanol operation of these engines are comparatively assessed, demonstrating the trade-offs between the methanol fraction, the key engine performance parameters, including brake thermal efficiency, peak in-cylinder pressure, heat release rate, and temperature, as well as the carbon dioxide, carbon monoxide, nitrogen oxides, and particulate matter emissions. The types of the reviewed engines considering the main two combustion methods, namely premixed and diffusion combustion, are discussed. Research gaps are identified, and recommendations for future research directions to address existing challenges for the wider use of methanol as a marine fuel are provided. This comprehensive review provides insights supporting methanol engine operation, and it is expected to lead to further studies towards more efficient use of methanol-fueled marine engines.