This study assesses the environmental impact of polyethylene terephthalate (PET) bottle-to-fibre recycling using the methodology of life-cycle assessment (LCA). Four recycling cases, including mechanical recycling, semi-mechanical recycling, back-to-oligomer recycling and back-to-monomer recycling were analysed. Three allocation methods are applied for open-loop recycling, i.e. the “cut-off” approach, the “waste valuation” approach and the “system expansion” approach. Nine environmental impact indicators were analysed, i.e. non-renewable energy use (NREU), global warming potential (GWP), abiotic depletion, acidification, eutrophication, human toxicity, fresh water aquatic ecotoxicity, terrestrial ecotoxicity and photochemical oxidant formation. The LCA results are compared with virgin PET fibre and other commodity fibre products, i.e. cotton, viscose, PP (polypropylene) and PLA (polylactic acid). The LCA results show that recycled PET fibres offer important environmental benefits over virgin PET fibre. Depending on the allocation methods applied for open-loop-recycling, NREU savings of 40–85% and GWP savings of 25–75% can be achieved. Recycled PET fibres produced by mechanical recycling cause lower environmental impacts than virgin PET in at least eight out of a total of nine categories. Recycled fibres produced from chemical recycling allow to reduce impacts in six to seven out of a total of nine categories compared to virgin PET fibres. Note that while mechanical recycling has a better environmental profile than chemical recycling, chemically recycled fibres can be applied in a wider range of applications than mechanically recycled fibres.