The power supply of a remote island is mainly from the diesel generator due to nature and environmental constraints for developing renewable electrical power generation. Recovering waste heat from diesel generators can reduce cost and satisfy the concurrent need for electricity, district heating or cooling on a remote island. This study investigates the optimization design of a district cooling system (DCS) on a remote island by the dynamic programming method. In a case study on Green Island, the waste heat from the diesel power plant can be recovered to drive an absorption chiller that satisfies the peak cooling load of 756 kW. The objective function of the optimization design includes the capital cost and the running cost during the period of the life cycle. The dynamic programming method is adopted to minimize the objective function, and the constraint involves the conservation of energy between the chiller and the chilled water storage tank. The results showed that a 510 kW absorption chiller and a storage tank capacity of 1978 kW-h achieved the optimization of the DCS. The averaged energy conservation rate was about 75.7%. Moreover, the electricity consumption and CO2 emission were reduced by 955.8 MWh and 675 tons per year, respectively. Based on the difference in the electricity prices of electric utility companies, the investment in the DCS is expected to have a four-year payback period. These optimization results are based on an evaluation of energetic, economic and environmental effects, which are also suitable for any kind of regions without direct access to interconnected electrical networks.