Forty newborn Holstein female calves (BW = 39.9 ± 2.1 kg) were assigned to 1 of 4 treatment groups (each consisting of 10 animals) in a 2 × 2 factorial arrangement of supplemental soybean oil [0 vs. 3% soybean oil (SBO) on dry matter basis] and forage level [0 vs. 15% alfalfa hay (AH) on dry matter basis] to evaluate the interaction effect of supplemental fat and forage feeding level in starter feed of dairy calves. Treatments were; 1) neither SBO supplementation nor AH inclusion (NSBO-NAH); 2) SBO supplementation but no AH included (SBO-NAH); 3) no SBO supplementation but AH included (NSBO-AH); and 4) SBO supplementation with AH (SBO-AH). Calves had ad-libitum access to water and starters throughout the study and weaned on day 63 of age but remained in the study until day 73 of age. The results showed that SBO supplementation reduced starter intake, average daily gain (tendency), and fecal consistency compared to un-supplemented diets. The lowest digestibility for neutral detergent fiber and crude protein, as well as the lowest wither height and volatile fatty acid production were found for SBO-AH diet among experimental treatments. Moreover, the lowest urinary purine derivatives excretion but the highest urinary nitrogen excretion found in SBO-AH diet indicated the lowest nitrogen utilization efficiency among experimental treatments. In summary, based on the current study condition, because the negative effects of SBO supplementation were exacerbated when AH was incorporated in the starter feed, concurrent feeding of SBO and AH is not recommendable in young calves.