Algae have been considered as a promising feedstock for biofuels. Because scaling-up algae biofuels production consumes significant amount of water, the impact of water use should be considered. This study evaluates algae-derived biofuel production potential in the United States (US) with consideration of regional water stress. We identified 7,075 potential sites in the US meeting land, biomass productivity and CO2 co-locating criteria using the Biomass Assessment Tool (BAT). The impact of water use for algal biofuel production in terms of water scarcity footprint is quantified using modeled 33-year site-scale water consumption from BAT and the county-level water stress indicator from the Available Water Remaining for the US (AWARE-US) metric. Long-term (20 billion gallon per year [BGY]) and near-term (5 BGY) renewable diesel (RD) production targets are considered. To select suitable algae cultivation facilities, biomass yield and water use are considered with and without a water stress constraint. We found that ranking sites based on biomass yield results in a high water use impact (24.5 thousand US equivalent billion gallons (BGYe) for the long-term RD target). If sites are instead ranked on water use efficiency, water consumption is reduced on average by 62%, with an average reduction in biomass yield by 25%. To reconcile trade-offs between biomass yield and water use impact, AWARE-US can be applied along with considering biomass yield. This strategy removes sites located in water stressed areas while keeping high productivity sites. For the 20 BGY RD target, this reduces water use impact by 55% without lowering biomass productivity or 97% with moderate reductions (4% on average) in biomass productivity, compared to the sites ranked by biomass yield alone. The results demonstrate that incorporating water stress into energy-scale algae biofuel production planning is key to achieving synergies between biofuel yield and fresh water use impact.