The construction sector generates substantial environmental impacts and contributes significantly to plastic waste accumulation. This study quantifies the mechanical and environmental effects of partially replacing fine aggregate in mortar with granulated polyethylene terephthalate (PET) at 0%, 5%, 10%, and 15% by weight of fine aggregate. Mortar performance was evaluated for compressive strength at 7 and 28 days, while environmental impacts were assessed via life-cycle indicators: embodied carbon (EC), embodied energy (EE), abiotic depletion potential (ADP), and eco-strength efficiency (ESE). At 5% PET substitution, 28-day compressive strength increased by 9.73% relative to plain mortar. Density decreased by 2.55%, and ADP decreased by 2.15%, indicating a measurable reduction in mineral resource depletion. Increasing PET substitution to 10% and 15% reduced compressive strength by 2.89–16.59% and eco-strength efficiency by 39.10–54.91%, while embodied carbon increased by 59.47–84.98%, and embodied energy increased by 55.40–79.16% demonstrating that higher PET content elevates energy and carbon burdens. Workability changes were minor 4.55–11.11% and did not significantly affect environmental outcomes. These results provide quantified evidence of the trade-off between mechanical performance and environmental impacts in PET-modified mortar. The optimal substitution level for balancing compressive strength enhancement with reduced resource depletion is 5%, as higher levels lead to increased embodied impacts despite lower mineral extraction.