In developing countries dung cakes combustion as a household cooking fuel is a common practice; however this traditional fuel comes along with related environmental issues. The objective of this study was to assess the environmental impacts of the substitution of dung combustion by biogas systems in rural Ethiopia. For this purpose, the method of life cycle assessment was applied according to ISO 14040 and 14044 standards with a consequential life cycle assessment approach. In terms of greenhouse gas emissions, the results demonstrate that mainly avoided methane and nitrous oxide emissions from dung drying and dung combustion lead to an environmental advantage of biogas systems in all scenarios of this study. Also the utilization of biogas digestate as organic fertilizer contributes considerably to savings of greenhouse gas emissions. The results indicate that about 13′542t of carbon dioxide equivalents can be saved annually in Ethiopia by the biogas plants installed in the years 2009–2013. Dung combustion causes indoor pollution by releasing high amounts of nitrogen oxides and particulate matter emissions and thereby having a direct negative impact on health. These emissions can be reduced considerably when using biogas instead of dung cakes for the provision of household cooking energy. Substituting traditional energy sources - dung cakes - with biogas systems, would lead to primary energy demand savings as well as potential environmental advantages regarding global warming, eutrophication, acidification, terrestrial eco-toxicity and human toxicity. Besides that, lower emissions from plant-available nutrients as well as particulate matter reduction, can create the basis for more efficient agricultural systems and potentially increase the health of the rural population. Nonetheless, to ensure a reduction of global warming potential it is mandatory building technically mature biogas plants with low methane leakage.