Vegetable oils can be used to increase energy density in diets; manipulate rumen fermentation; and alter the capacity for degradation, digestion and absorption of nutrients. Two experiments were conducted to evaluate palm kernel oil (PKO) in the diet of confined bulls with the inclusion of 0.0, 11.5, 23.0 and 34.6 g PKO/kg dry matter (DM). The first experiment evaluated nutrient intake, performance, ingestive behavior and carcass characteristics. In the second experiment, steers crossbred with a ruminal cannula were used to evaluate digestibility, nitrogen balance, microbial protein synthesis, short-chain fatty acid levels and protozoal counts. The results showed that the inclusion of PKO linearly reduced intake in kg/day (DM, crude protein—CP, neutral detergent fiber—NDFap, nonfibrous carbohydrates—NFC and total digestible nutrient—TDN) and digestibility (DM, NDFap and TDN). Ether extract intake increased quadratically with the predicted maximum intake of 15.4 g/kg DM. Regarding ingestive behavior, there was a quadratic increase in rumination time and a quadratic reduction in idle time. Nitrogen balance, nitrogen intake, nitrogen retention, microbial protein production, acetate, butyrate, acetate/propionate ratio and protozoa count showed linear decreases due to dietary PKO inclusion. Regarding the carcass characteristics, linear decreases were observed for the final weight, average daily gain, hot carcass weight, cold carcass weight, hot carcass yield, cold carcass yield, loin eye area and subcutaneous fat thickness. The inclusion of PKO at up to 34.6 g/kg DM in diets for confined bulls reduces intake, negatively affecting digestibility, performance and carcass characteristics.