Recovering and recycling nitrogen available in waste streams would reduce the demand for conventional fossil-based fertilizers and contribute toward food security. Based on life cycle assessment (LCA), this study aimed to evaluate the environmental performance of nitrogen recovery for fertilizer purposes from sewage sludge treatment in a municipal wastewater treatment plant (WWTP). Utilizing either air stripping or pyrolysis-derived biochar adsorbent, nitrogen was recovered from ammonium-rich reject streams generated during mechanical dewatering and thermal drying of anaerobically digested sewage sludge. A wide range of results was obtained between different scenarios and different impact categories. Biochar-based nitrogen recovery showed the lowest global warming potential with net negative GHG (greenhouse gas) emissions of −22.5 kt CO2,eq/FU (functional unit). Ammonia capture through air stripping caused a total GHG emission of 2 kt CO2,eq/FU; while in the base case scenario without nitrogen recovery, a slightly lower GHG emission of 0.2 kt CO2,eq/FU was obtained. This study contributes an analysis promoting the multifunctional nature of wastewater systems with integrated resource recovery for potential environmental and health benefits.