Microalgae have great potential as an energy and feed resource. Here we evaluate the water use associated with freshwater algae production and find it is possible to scale U.S. algae biofuel production to 20.8 billion liters of renewable diesel annually without significant water-stress impact. Amongst potential sites, water-stress is significantly more variable than algae productivity across location and season. Thus, it is possible to reduce water-stress impact, quantified as water scarcity footprint, through the choice of algae site location. We test three site-selection criteria based on (1) biomass productivity, (2) water-use efficiency, and (3) water-stress impact and find that adding water-stress constraints to productivity-based ranking of suitable sites reduces water-stress impact by 97% and water consumption by half, compared with biomass-productivity ranking alone, with little productivity impact (<1.7% per-site on average). With 20.8 billion liters, algae could meet 19.7% of U.S. jet fuel demand with a freshwater demand of less than 1.4% of U.S. irrigation consumption. Evaluating water-stress impact is important because the impact of unit water consumption on water stress varies significantly across regions and seasons. Considering seasonal water balances allows producers to understand the combined seasonal effects of hydrologic flows and productivity, thereby avoiding potential short-term water stress.