A series of dipeptide ionic liquids (ILs) with l-phenylalanine and l-alanine fragments in structure were synthesized and their possible degradation pathways were analyzed. Based on this analysis, potential transformation products (PTPs) were proposed and synthesized. All of these compounds (25 in total) went through microbial toxicity screening and aerobic biodegradation testing. Obtained results demonstrated that by investigating ILs and PTPs with a dipeptide fragment (in tandem with single amino acid analogues), the design of ILs with high biodegradation values in closed bottle test can be accomplished. One finding was that within the scope of the compounds studied, l-phenylalanine containing compounds were more biodegradable than l-alanine derivatives. In addition to the choice of amino acid residue, its position in the dipeptide IL structure also had a significant effect on biodegradability. PyCH2CO-Phe-Ala-OEt IL, where l-phenylalanine was in close proximity to the positively charged pyridinium sub-unit, gave higher biodegradation percentages compared to PyCH2CO-Ala-Phe-OEt IL, where alanine was closer to pyridinium than the phenylalanine residue. Analysis of PTPs data showed that the presence of an alanine residue resulted in undesirable (less green) PTPs more often compared to PTPs containing phenylalanine, especially when alanine was in close proximity to the pyridinium headgroup. Based on both toxicity and biodegradation testing results preferable and less preferable subunits can be chosen for the design of new sustainable chemicals based on amino acids. Results from this study demonstrate a potential of designing new sustainable chemicals using amino acid moieties as part of their structure.