The main purpose of this study is to comprehensively investigate a biodiesel production system by transesterification of mutton tallow. To this end, an exergo-environmental life cycle assessment was applied. Exergetic investigation identifies the location, magnitude and sources of the thermodynamic inefficiencies in the biodiesel production process (the highest priority components for process improvement from the thermodynamic point of view). In contrast, environmental life cycle assessment identifies the environmental hot spot subsystems of the entire mutton tallow-to-biodiesel system (the highest priority life cycle steps for environmental improvement). The results obtained show that approximately 83.3% of the exergy fed to the process is recovered in the useful product (biodiesel). The transesterification reactor should have the highest priority for process improvement from the thermodynamic point of view. However, the environmental improvements of the entire biodiesel production system should be focused on minimizing methanol consumption. The net energy ratio of the system is approximately 2.3. Therefore, the biodiesel system presents a net energy gain. Using economic allocation instead of the mass-based approach leads to an increase in the life cycle indicators by approximately 11%. However, this difference is only 6.7% when considering energy allocation. (C) 2018 Elsevier Ltd. All rights reserved.