This study performs a cradle‐to‐grave life cycle assessment of a 5 MW proton exchange membrane water electrolysis plant. The analysis follows a thorough engineering‐based bottom‐up design based on the electrochemical model of the system. Three scenarios are analyzed comprising a state‐of‐the‐art (SoA) plant operated with the German electricity grid‐mix, a SoA plant operated with a completely decarbonized energy system, and a future development plant electrolyzer with reduced energy and material demand, operated in a completely decarbonized energy system. The results display a global warming potential of 34 kg CO2‐eq. kg‐H2−1 and indicate a reduction potential of 89% when the plant is operated in a decarbonized energy system. A further reduction of 9% can be achieved by the technological development of the plant. Due to the reduced impacts of operation in a completely decarbonized energy system, the operation at locations with large offshore wind electricity capacity is recommended. In the construction phase, the stacks, especially the anode catalyst iridium, bipolar plates, and porous transport layers, are identified as dominant sources of the environmental impact. A sensitivity analysis shows that the environmental impact of the construction phase increases with a decreasing amount of operational full load hours of the plant.