The use of algae as a feedstock for biodiesel production is a rapidly growing industry, in the United States and globally. A life cycle assessment (LCA) is presented that compares various methods, either proposed or under development, for algal biodiesel to inform the most promising pathways for sustainable full-scale production. For this analysis, the system is divided into five distinct process steps: (1) microalgae cultivation, (2) harvesting and/or dewatering, (3) lipid extraction, (4) conversion (transesterification) into biodiesel, and (5) byproduct management. A number of technology options are considered for each process step and various technology combinations are assessed for their life cycle environmental impacts. The optimal option for each process step is selected yielding a best case scenario, comprised of a flat panel enclosed photobioreactor and direct transesterification of algal cells with supercritical methanol. For a functional unit of 10 GJ biodiesel, the best case production system yields a cumulative energy demand savings of more than 65 GJ, reduces water consumption by 585 m(3) and decreases greenhouse gas emissions by 86% compared to a base case scenario typical of early industrial practices, highlighting the importance of technological innovation in algae processing and providing guidance on promising production pathways.