The objective was to determine the effect of replacing barley grain and canola meal with high-lipid by-product pellets (HLBP; 14.6% CP, 29.8% NDF, 9.0% fat, and 5.52 MJ NE/kg in DM) on DMI, ruminal fermentation, nutrient flow at the omasal canal, and nutrient digestibility. Four ruminally cannulated and ovariectomized Hereford × Gelbvieh heifers (initial BW of 631.9 ± 23.3 kg; mean ± SD) were used in a 4 × 4 Latin square design. Periods consisted of 28 d, including 10 d for diet transition, 11 d for dietary adaptation, and 7 d for measurements. Heifers were fed a typical finishing diet consisting of 89% of concentrate (barley grain and canola meal; CONT), 6% of barley silage, and 5% of mineral and vitamin supplement (on DM basis). Dietary treatments consisted of a CONT or diets where 30% (HLBP30), 60% (HLBP60), and 90% (HLBP90) of the barley grain and canola meal were replaced with HLBP. Dry matter intake was not affected by treatment ( > 0.10). Total short-chain fatty acid concentration and molar proportions of acetate, propionate, and butyrate ( > 0.10) among treatments and ruminal ammonia did not differ ( > 0.10) among treatments, and ruminal ammonia increased ( = 0.03) linearly with increasing HLBP inclusion rate in the diet. Mean and maximum pH increased, whereas the duration and area that pH was below 5.8, 5.5, and 5.2, thresholds used for mild, severe, and acute ruminal acidosis, respectively, decreased linearly ( ≤ 0.05) with increasing rates of inclusion of HLBP. Organic matter flow at the omasal canal increased linearly ( = 0.03) with increasing HLBP inclusion rate in the diet. However, OM digestibility coefficients and apparent ruminal NDF and ADF digestibility yielded negative values for some animals, especially those fed HLBP90, indicating that ruminal digestibility was underestimated. Total tract OM digestibility decreased linearly ( < 0.01) with increasing inclusion rates of HLBP. This study showed that HLBP inclusion in substitution for barley grain and canola meal linearly decreases the severity of ruminal acidosis in cattle fed a typical grain-based finishing diet. However, total tract nutrient digestibility was negatively affected.