While the production costs and logistical benefits of biomass pelleting have been widely discussed in the literature, the downstream economic and environmental benefits of processing pelleted biomass have been largely neglected. To investigate those benefits, we performed a comparative techno-economic analysis and life cycle assessment of producing ethanol using loose and pelleted forms of biomass. Analyses of a 2000 metric tons (dry)/d biorefinery showed that using pelleted biomass is more economical than using loose or baled biomass. The lowest minimum ethanol selling price (MESP) for pelleted biomass was USD 0.58/gal less than the lowest MESP for loose biomass. Among all processing conditions analyzed, MESP for ethanol produced with pelleted biomass was always lower than when produced with loose biomass. Shorter pretreatment and hydrolysis times, higher pretreatment solids loadings, lower ammonia requirements, and reduced enzyme loadings were the primary factors contributing to lower MESP with pelleted biomass. Similarly, pelleted biomass also demonstrated a 50% lower life cycle greenhouse gas emission compared to loose biomass. Emissions from higher pelleting energy were offset by downstream advantage in lower chemical needs.