Wheat (Triticum aestivum L.) is a strategic agricultural crop that plays a significant role in maintaining national food security and sustainable economic development. Increasing technical performance considering lowering costs, energy, and environmental consequences are significant aims for wheat cultivation. For drylands, which cover approximately 41% of the world’s land surface, water stress has a considerable negative impact on crop output. The current study aimed to assess the environmental aspects of chemical fertilizer in combination with compost in dryland and irrigated winter wheat production systems through life cycle assessment (LCA). The cradle-to-farm gate was considered as the system boundary based on one tone of wheat yield and four strategies: D-C (dryland with compost), D (dryland without compost), I-C (irrigated with compost), and I (irrigated without compost). Based on the results, the highest and lowest amounts of wheat yield were related to the I-C and D strategies with 12.2 and 6.7 ton ha−1, respectively. The LCA result showed that the I strategy in comparison with other strategies had the highest negative impact on human health (49%), resources (59%), ecosystem quality (44%), and climate change (43%). However, the D-C strategy resulted in the lowest adverse effect of 6% on human health, 1% on resources, 10% on ecosystem quality, and 11% on climate change. Utilizing a combination of fertilizer and compost in dryland areas could ensure a higher yield of crops in addition to alleviating negative environmental indicators.