In this study, the life cycle assessment (LCA) method has been used to evaluate the environmental impacts of various municipal solid waste (MSW) management system scenarios in Banepa municipality, Nepal, in terms of global warming potential (GWP), acidification potential (AP), eutrophication potential (EP), human toxicity potential (HTP), abiotic depletion potential (ADP), and photochemical ozone creation potential (POCP). There are at least six possible scenarios of MSW management in Banepa: the current or baseline scenario (Scenario 1); composting with landfilling (Scenario 2); material recovery facility (MRF) recycling, composting, and landfilling (Scenario 3); MRF and anaerobic digestion (AD); composting, and landfilling (Scenario 4); MRF, composting, AD, and landfilling (Scenario 5); and, finally, incineration with landfilling (Scenario 6). Using both information from Ecoinvent 3.6 (2019) and published research articles, a spreadsheet tool based on the LCA approach was created. The impact of the recycling rate on each of the six abovementioned scenarios was evaluated using sensitivity analysis, which showed that the recycling rate can considerably decrease the life-cycle emissions from the MSW management system. Scenario 3 was found to have the least overall environmental impact with a GWP of 974.82 kg CO2 eq. per metric ton (t), EP of 0.04 kg PO4 eq./t, AP of 0.15 kg SO2 eq./t, HTP of 4.55 kg 1,4 DB eq./t, ADP of −0.03 kg Sb eq./t, and POCP of 0.06 kg C2H4 eq./t. By adoption of MRF and biological treatments such as composting and AD, environmental impact categories such as AP, EP, HTP, ADP, POCP, and GWP can be significantly reduced. The findings of this study can potentially serve as a reference for cities in the developing world in order to aid in both the planning and the operation of environmentally friendly MSW management systems.