In this paper, two fundamentally different urban wastewater systems are assessed from an environmental impact perspective. One system represents a centralised, high-tech, end-of-pipe structure whereas the second system is primarily based on source-separation strategies. Using material flow analysis in combination with evaluation methods based on life-cycle assessment the systems are evaluated by means of simulation and the results are discussed. A set of priority indicators for environmental assessments of urban water systems is suggested and applied in the analysis. Energy issues are also commented upon. The main intent of the paper is to present the principles of this type of assessment rather than detailed numbers for all possible environmental effects and hazardous substances emitted to air, water and soil. It represents one of several building blocks for a future multi-criteria decision-support system to evaluate urban water management from a sustainability perspective.