A method for assessing the environmental impacts of freshwater consumption was developed. This method considers damages to three areas of protection: human health, ecosystem quality, and resources. The method can be used within most existing life-cycle impact assessment (LCIA) methods. The relative importance of water consumption was analyzed by integrating the method into the Eco-indicator-99 LCIA method. The relative impact of water consumption in LCIA was analyzed with a case study on worldwide cotton production. The importance of regionalized characterization factors for water use was also examined in the case study. In arid regions, water consumption may dominate the aggregated life-cycle impacts of cotton-textile production. Therefore, the consideration of water consumption is crucial in life-cycle assessment (LCA) studies that include water-intensive products, such as agricultural goods. A regionalized assessment is necessary, since the impacts of water use vary greatly as a function of location. The presented method is useful for environmental decision-support in the production of water-intensive products as well as for environmentally responsible value-chain management.