Renewable energy sources and the need to reduce greenhouse gas emissions have led to a growing interest in decentralized and less capital-intensive energy technologies. One such technology is a small-scale rainfall-based hydropower system that can be used for local electricity production. However, the environmental sustainability of such systems was never evaluated before. Few studies analyzed the potential benefits and trade-offs between possible configurations of the systems. Therefore, the research compares the life cycle greenhouse gas (GHG) emissions of the rooftop rainfall-based micro-hydropower system as an alternative electricity production method and aims to identify the major “hotspots” that contribute to environmental load. The study assesses the influence of different aspects of the rooftop rainfall-based micro-hydropower system, including the type of turbine, the intensity of rainfall, and the area of the roof, on GHG emissions. The life cycle assessment (LCA) method was used and followed ISO 14040 and ISO 14044 standards. In particular, the assessment looked at the effect on global warming, resource use, water use, human toxicity, and land use, among other impacts. The analysis revealed that the impact of the rooftop rainfall-based micro-hydropower system mostly comes from construction and has little effect during operation. It also showed that the choice of construction materials and the intensity of water flow significantly affect the result, with proper choices being able to reduce emissions and resource use by 20-30%. The research proved that electricity production using rainfall-based small-scale hydropower systems is a preferable alternative to conventional methods. The results can be used by policymakers and researchers to promote sustainable decentralized electricity production.