The escalating concerns over climate change and dwindling fossil fuel reserves necessitate the urgent exploration of alternative, low-carbon fuels for internal combustion engines (ICEs). Dimethyl Ether (DME) has emerged as a promising candidate due to its favorable combustion properties, clean emission profile, and diverse feedstock options. This article, structured in the IMRaD format, comprehensively reviews the prospects and challenges associated with adopting DME as an alternative fuel in ICEs. It delves into DME's production pathways, thermophysical properties, its impact on engine performance and emissions, and the critical modifications required for its practical application. While DME offers significant advantages in reducing particulate matter and nitrogen oxides, challenges related to its low lubricity, bulk modulus, and the need for specialized fuel injection equipment and infrastructure must be addressed for its widespread adoption. This review synthesizes recent research, highlighting key advancements and persistent hurdles, to provide a holistic understanding of DME's role in the future of sustainable transportation.