Microalgae are a promising feedstock for sustainable fuel and nutritional products. To be economically viable, algal biorefineries will need to produce multiple products, such as nutraceuticals and animal feed, in addition to fuel. Life cycle assessment (LCA) has been applied widely to algal biorefineries, but results vary across studies. Here we address two methodological challenges that can lead to variability in LCAs of multi-product algal biorefineries: the choice of functional unit and the method used to handle co-products. LCA was conducted for an algal biorefinery that produces two representative products?fuel and animal feed?using three functional units: (1) 1 MJ fuel, (2) 1 kg animal feed, and (3) 1 ha of production area, coupled with the system expansion method. For the fuel-based functional unit, the system expansion method was compared to impact allocation based on mass, energy, and market value of the biorefinery products. The choice of functional unit affects the results for several environmental indicators. For ecosystem quality, the choice of functional unit can change the overall balance of environmental impacts from harmful to beneficial. The effect of functional unit on climate change depends on the boundary considered in the model?i.e., ?well to gate? or ?well to wheels?. When a fuel-based functional unit is used, the choice of co-product handling method (i.e., allocation versus the system expansion method) affects environmental impacts, such as ecosystem quality and climate change, differently. For LCAs that use a fuel-based functional unit to compare algal biofuel to other fuels, multiple co-product handling methods should be analyzed and presented to stakeholders. A land based functional unit coupled with the system expansion method can be used to improve LCAs that compare among multi-product algal biorefineries.