Introduction The cost of animal feed is a serious limiting factor in livestock production in arid and semi-arid regions. This study investigated whether a locally formulated total mixed ration (TMR) based on date palm by-products, fish processing waste, and Moringa oleifera could serve as an economical alternative to commercial TMR for fattening Omani lambs. Methods Twenty intact male Omani lambs (initial body weight 20.5 +/- 2.3 kg, approximately 5 months old) were randomly assigned to two dietary treatments (n = 10 per treatment) in a completely randomized design for 84 days. The formulated TMR contained palm fronds (16%), barley grains (20%), fish meal (10%), date syrup (18%), Moringa oleifera leaves and stems (34%), and sodium chloride (1%). Productive performance, nutrient digestibility, hematological and biochemical parameters, carcass characteristics, meat quality, and feeding economics were evaluated and compared between the two dietary treatments. Results Commercial TMR lambs gained significantly more total weight (11.30 vs. 6.37 kg; P < 0.0001) and average daily gain (0.135 vs. 0.076 kg/day) with better feed conversion ratio (6.17 vs. 11.19 kg feed/kg gain; P = 0.0011) than lambs fed formulated TMR. Crude protein digestibility was significantly higher in formulated TMR (68.64 vs. 61.35%; P = 0.039), whereas neutral detergent fiber digestibility was significantly higher in commercial TMR (49.51 vs. 36.56%; P = 0.002). Animals fed commercial TMR had significantly greater slaughter weight (30.86 vs. 25.54 kg; P = 0.004), but dressing percentage did not differ between groups. Internal fat deposition was significantly lower (P = 0.012) in formulated TMR animals, with 35.4% less total internal fat (1.305 vs. 2.021 kg). Hematological variables were within normal physiological limits in both groups. Blood biochemical analysis showed significant time & times; treatment interactions for glucose (P = 0.001) and calcium (P = 0.020). No significant treatment effects were observed for any meat quality attributes, including ultimate pH (5.31 vs. 5.37), cooking loss (27.37 vs. 25.90%), and shear force (3.90 vs. 3.81 kg; all P > 0.05). The formulated TMR reduced daily feeding cost by 68.5% and lowered feed cost per kg live weight gain by 41.3% compared to commercial TMR. Hot carcass weight (13.42 +/- 2.29 vs. 11.28 +/- 2.32 kg; P = 0.053) and cold carcass weight (13.07 +/- 2.25 vs. 11.03 +/- 2.19 kg; P = 0.057) were similar between commercial and formulated TMR groups, respectively. Discussion/conclusion Despite lower fiber digestibility and metabolizable energy availability than commercial TMR, which translated to reduced growth performance, the formulated TMR offered substantial economic benefits with a 68.5% reduction in daily feeding cost and a 41.3% lower feed cost per kg live weight gain compared to commercial TMR. Meat quality, hot carcass weight, cold carcass weight, and hematological profiles were unaffected, and internal fat deposition was reduced by 35.4%. The formulated TMR represents a viable and cost-effective option for sheep production in arid regions where date palm by-products, fish waste, and Moringa oleifera are locally available.