Life cycle assessment (LCA) has been a well-known tool to evaluate the potential environmental impacts associated with products or processes from the cradle to the grave. The scientific community in LCA and wastewater treatment (WWT) has widely used the LCA approach to evaluate different WWT scenarios since the 1990s. Anaerobic technology to treat municipal wastewater has drawn more attention recently since it has significant potential to elevate energy saving and reduce operating costs. This review presents studies published since 2000 and aims to investigate how life cycle thinking tools are applied to assess the environmental sustainability in studies using different anaerobic WWT configurations (e.g., comparison of the other anaerobic systems with conventional systems, comparison of various anaerobic systems used with hybrid aerobic systems, or comparison of the same processes with different operation conditions) in municipal wastewater. This study consists of a step-by-step analysis of the LCA methodology. Climate change (CC), acidification potential (AP), and eutrophication potential (EP) are the most assessed environmental impacts in the LCA studies dealing with anaerobic WWT technologies. According to the studies, anaerobic WWT of municipal wastewater tends to have a less environmental impact than conventional activated sludge systems related to nutrient and energy recovery and dissolved methane capture from effluent. This study also highlights the factors affecting LCA results, like functional unit (FU) and system boundary selection, data collection, impact categories, and impact assessment methods selection. Moreover, challenges and future directions for LCA applications in anaerobic treatment technologies are discussed.