In Andean dairy systems, livestock generates a daily income through the sale of milk and cheese but also fulfils other roles which are crucial for rural livelihoods such as the contribution of protein to local diets, the provision of draught power and organic fertilizer, the reduction of economic risk and the accrual of savings. The objective of this study was to compare different approaches to cope with multifunctionality of livestock in Life Cycle Assessment (LCA). Based on local data from a smallholder dairy production system in the Southern Peruvian Andes environmental impacts of 1 kg energy corrected milk (ECM) were calculated with LCA methodology considering nine livestock functions: production of dairy products (1) and meat (2) for the market, production of milk for family consumption (3) and as food for calves (4), provision of organic fertilizer (5) and draught power (6), role as savings asset (7), risk insurance (8) and part of family tradition (9). Impacts were distributed among these functions using different methodological approaches: NA, no allocation; EM, economic allocation to market products; ET, economic allocation to all livestock functions; FP, allocation according to farmers´ perception and SE, system expansion (substitution). The results varied considerably depending on the method used. 1 kg of ECM contributed to global warming with 1.65, 1.38, 1.25, 0.71 and 0.89 kg CO2-equivalents using mehods NA, EM, ET, FP and SE, respectively. Similar patterns were observed for acidification and eutrophication potentials. Enteric fermentation was the main source of greenhouse gases whereas eutrophication and acidification potentials were determined by alfalfa pasture management. The results of the study showed that: (i) LCA results are highly sensitive to the number and types of livestock functions considered and the allocation criteria applied, (ii) that the economic value of livestock functions does not necessarily reflect their importance for rural livelihoods and (iii) that the application of system expansion/substitution to livestock systems is limited due to lacking equivalency of functions and products from alternative production systems.