Sewage sludge handling is becoming a concern in Europe due to its increasing amount and the presence of contaminants, such as heavy metals and pharmaceutical and personal care products (PPCPs). Currently, over 70% of sludge in Europe is treated thermally by incineration or used as fertilizer in agriculture. New thermochemical methods are under development and are expected to be implemented in the near future. This paper considers the life cycle environmental impacts of the following five alternatives for sludge handling, taking into account the presence of heavy metals and PPCPs: i) agricultural application of anaerobically digested sludge; ii) agricultural application of composted sludge; iii) incineration; iv) pyrolysis; and v) wet air oxidation. The results suggest that anaerobic digestion with recovery of nutrients and electricity has the lowest environmental impacts in 11 out of 18 categories considered. For the mean to maximum resource recovery, composting is the worst alternative, followed by pyrolysis with lower recovery rates. Agricultural application of anaerobically digested sludge has the highest freshwater ecotoxicity due to heavy metals, unless their concentration is in the lowest range, as found in some European sewage sludge applied on land. Therefore, stricter control of heavy metals in the sludge is needed for this option to limit freshwater ecotoxicity to the levels comparable with the thermal processes. The results also indicate that PPCPs have a negligible contribution to freshwater ecotoxicity when compared to heavy metals in the anaerobically digested sludge. Since thermal processes are currently drawing attention due to their potential benefits, the findings of this work suggest that their adoption is environmentally beneficial only if high resource recovery rates can be achieved.