Upflow anaerobic sludge blanket (UASB) reactors used in sewage treatment generate two by-products that can be reused: sludge and biogas. At the present time in Brazil, most of this resulting sludge is disposed of in sanitary landfills, while biogas is commonly burned off in low-efficiency flares. The aim of the present study was to use life cycle assessment to evaluate the environmental impacts from four different treatment and final destination scenarios for the main by-products of wastewater treatment plants. The baseline scenario, in which the sludge was sanitized using prolonged alkaline stabilization and, subsequently, directed toward agricultural applications and the biogas destroyed in open burners, had the most impact in the categories of global warming, terrestrial ecotoxicity, and human non-carcinogenic toxicity. The scenario in which heat resulting from biogas combustion is used to dry the sludge showed significant improvements over the baseline scenario in all the evaluated impact categories. The recovery of heat from biogas combustion decreased significantly the environmental impact associated with global warming. The combustion of dried sludge is another alternative to improve the sludge management. Despite the reduction of sludge volume to ash, there are environmental impacts inherent to ozone formation and terrestrial acidification.