A Decentralized Wastewater Treatment System (DEWATS) provides an economically feasible and efficient wastewater treatment solution especially in developing countries. It has an enormous potential for developing a sustainable environmental sanitation system. In this study, the treatment efficiency of eight DEWATS plants was evaluated in the state of Maharashtra, India, for their performance in terms of selected physico-chemical parameters of the wastewater. Although the efficiency of some of the plants was lower than that reported in literature, the effluent quality of all the plants was within the permissible discharge limits of the Central Pollution Control Board for all the parameters. Comprehensive assessment of Plant I was carried in terms of its technical and socio-economic aspects. Moreover, LCA tool has been utilized to evaluate the environmental impacts of the operation stage of DEWATS. The midpoint, CML 2001 (April 2015) methodology was adopted, in which 11 impact categories were considered. From the life cycle impact assessment and interpretation, the main impacts are identified as releases of COD, P-PO43-, and N-NH4+ to water bodies and disposal of sludge. Due to negligible energy consumption, the operation stage was found to be less damaging to the environment. It was concluded that DEWATS can be a good alternative for treating wastewater with negligible energy and chemical consumption.