The share of prefabricated modular residential buildings in the Australian construction market is growing mainly because they are quicker to erect on-site than traditional construction, and often cheaper; but how about their carbon footprint and more particularly their thermal performance? To bring some light on this question, this paper uses two case studies where existing prefabricated modular buildings (a detached house and a multi-storey residential building) are compared to their equivalent in traditional on-site construction methods. The thermal performance is assessed using 3D modelling and energy simulation, while carbon footprint is assessed by Life Cycle Analysis. The thermal simulations showed that these prefabricated modular buildings perform better in winter but the study also shows that low inertia modular buildings can require more cooling energy in the summer in certain climate zones. Looking at the overall carbon footprint of the construction elements, the LCA shows that prefabricated buildings are not always less carbon intensive than their traditional equivalent and a wise choice of materials remains a necessity. The discussion emphasises the importance of the local context and particularly the role of thermal inertia in summer for Mediterranean Climate. It also demonstrates the importance of operating energy in the overall carbon footprint of a building and, more generally, how prefabrication can easily achieve a lower carbon footprint than on-site construction.