Life cycle assessment was carried out to evaluate the environmental values of dimethylas a diesel alternative fuel with the assumption of dimethyl ether production from natural gas via synthesis gas. The whole life cycles from raw material acquisitions to the final usages of diesel and dimethyl ether were involved in the assessment. Inventory analysis showed that the most significant environmental impacts came from resource depletions and air emissions. Impact assessment revealed that dimethyl ether was environmentally better in the aspect of human health and ecosystem quality but worse in resource depletions compared with diesel fuel. Suggestions for environmental improvement of dimethyl ether as a diesel alternative fuel were prepared based on the assessment results.