Ship recycling is gaining attention in Indonesia due to the increase in end-of-life ships and uneconomical nationally flagged ships, and is considered a prospective source of economic development and employment opportunity, and yet conceivably poses a threat to the health and safety of workers and the environment. There are international and national regulations that govern ship-recycling activities to ensure that the hazardous impacts of the industry are minimized. We investigated the disparity between current ship-breaking practices in Indonesia and the requirements of related international and national regulations, with the findings intended for use as a stepping stone to proposing a strategy to establish a green and sustainable ship-recycling industry. A benchmark study of the world’s leading ship-recycling countries was conducted, and a gap analysis was performed by comparing existing international and national regulations with current ship-breaking practices in Indonesia. We identified two types of ship-breaking practices in Indonesia: Conventional environmentally unfriendly ship-breaking method, conducted by most Indonesian ship-breaking yards, and a rather modern, more environmentally friendly method, conducted by ship-repair yards. However, neither of the practices met the requirements of the regulations, and improvements are therefore needed to make the ship-recycling industry more green and sustainable, and to gain international recognition.