Prefabricated construction has increasingly captivated the attention of the global construction sector due to factors such as reduced overall construction times and improved process efficiency. However, there is a considerable gap between high and low socio-economic countries in terms of adoption and degree of sustainability research. It is imperative to conduct comprehensive environmental assessment studies to identify the contribution of prefabrication technologies to sustainable development and to support sustainable decision-making. Thus, the current research investigates the cradle-to-gate environmental performance of prefabricated construction methods compared to traditional in-situ construction in buildings using the life cycle assessment (LCA) methodology. A case study office building constructed in Sri Lanka using traditional and prefabrication technologies is used to evaluate and compare the environmental impacts. The results reveal that building with prefabricated components provides greenhouse gas (GHG) emission savings of 8.06%. Moreover, the prefabricated building showed impact savings for all the mid-point impact categories considered in this study. Scenario analyses revealed an optimal distance of 120 km, providing environmental savings when adopting prefabrication. Besides, using alternative green concrete materials in prefabrication can reduce total GHG emissions by 2.83–12.05%. Future research can focus on incorporating end-of-life circular economy strategies and extending the environmental dimension to economic and social pillars. Further, the current research highlights the cruciality of an integrated decision support system for holistic decision-making on sustainable construction technologies. The outcomes of the study can provide a basis for construction industry stakeholders, academia, and policymakers to adopt and promote innovative sustainable construction in the Sri Lankan context.