Increasing public attention has been brought to bear on the environmental impacts of municipal solid waste (MSW) management in Macau, due to the continually increasing amount of MSW being generated and the limited space and capacity of waste treatment facilities. This study evaluates the current and potential patterns of MSW management with regard to environmental impacts in Macau, using the life cycle assessment (LCA) method. We also assess the baseline scenario, reflecting the existing MSW management system, as well as five other scenarios, exploring waste treatment innovations, to quantitatively predict potential environmental impact mitigation for Macau. Additionally, a sensitivity analysis is used to investigate the influence of the different assessment methods and recycling rates of valuable resources in the source separation process. The results show that the current management system of MSW in Macau can treat and dispose of the MSW well, and at the same time can generate some environmental benefits. Compared with Scenario 0 (the current MSW management system), Scenario 4 (source separation and incineration) shows the highest potential to increase the environmental benefits. Scenario 5 (integrated waste management) is also a good option, with higher benefits (85.96%) than Scenario 0. The analysis shows that, in each scenario (except Scenario 1, the past process of landfill only), the waste treatment processes, including source separation and incineration, dominate the environmental impacts; while processes such as collection and transportation, composting, and landfill, have a relatively small influence. The sensitivity analysis of recycling rate shows an approximately linear relation of inverse proportion between recycling rate and total environmental impact. Considering the limited financial resources and the current waste management practices in Macau, Scenario 4 would be the preferred choice.