For analyzing sustainability of algal biofuels, we identify 16 environmental indicators that fall into six categories: soil quality, water quality and quantity, air quality, greenhouse gas emissions, biodiversity, and productivity. Indicators are selected to be practical, widely applicable, predictable in response, anticipatory of future changes, independent of scale, and responsive to management. Major differences between algae and terrestrial plant feedstocks, as well as their supply chains for biofuel, are highlighted, for they influence the choice of appropriate sustainability indicators. Algae strain selection characteristics do not generally affect which indicators are selected. The use of water instead of soil as the growth medium for algae determines the higher priority of water- over soil-related indicators. The proposed set of environmental indicators provides an initial checklist for measures of biofuel sustainability but may need to be modified for particular contexts depending on data availability, goals of the stakeholders, and financial constraints. Ultimately, use of these indicators entails defining sustainability goals and targets in relation to stakeholder values in a particular context and can lead to improved management practices.