The use of industrial by-products as alternative materials to naturally sourced materials has been attracted researchers in the world. Following this trend, an experimental evaluation on the effect of using steel slag aggregate (SLA) to replace river sand (RS) on the engineering properties and microstructure of the mortar was performed. The SLA was used to replace RS at levels of 0–100% (an interval of 20%, by volume). The engineering properties of the mortars including compressive strength, water absorption, drying shrinkage, and ultrasonic pulse velocity (UPV) were tested up to the age of 56 days. The microstructure of all mortar samples was also observed. Test results showed that the replacement of < 60% RS by SLA negatively affected the properties of the mortars. Increasing the replacement levels to 60–80% enhanced the performance of the mortars. However, the mortar sample with 100% SLA did not show any improvement in its properties. As expected, all of the mortar samples prepared for this study achieved the compressive strength values of all above the target strength of 10 MPa. In which, the 80% SLA sample obtained the highest compressive strength value of 17.4 MPa and 18.9 MPa at 28 and 56 days, respectively. This result was furtherly confirmed through the microstructure observation of the mortars. Consequently, SLA was found as a potential alternative to RS in the production of construction mortars.