Conservationists are continually seeking new strategies to reverse population declines and safeguard against species extinctions. Here we evaluate the potential efficacy of a recently proposed approach to offset a major anthropogenic threat to many marine vertebrates: incidental bycatch in commercial fisheries operations. This new approach, compensatory mitigation for marine bycatch (CMMB), is conceived as a way to replace or reduce mandated restrictions on fishing activities with compensatory activities (e.g., removal of introduced predators from islands) funded by levies placed on fishers. While efforts are underway to bring CMMB into policy discussions, to date there has not been a detailed evaluation of CMMB's potential as a conservation tool, and in particular, a list of necessary and sufficient criteria that CMMB must meet to be an effective conservation strategy. Here we present a list of criteria to assess CMMB that are tied to critical ecological aspects of the species targeted for conservation, the range of possible mitigation activities, and the multi-species impact of fisheries bycatch. We conclude that, overall, CMMB has little potential for benefit and a substantial potential for harm if implemented to solve most fisheries bycatch problems. In particular, CMMB is likely to be effective only when applied to short-lived and highly-fecund species (not the characteristics of most bycatch-impacted species) and to fisheries that take few non-target species, and especially few non-seabird species (not the characteristics of most fisheries). Thus, CMMB appears to have limited application and should only be implemented after rigorous appraisal on a case-specific basis; otherwise it has the potential to accelerate declines of marine species currently threatened by fisheries bycatch.