Aromatic plants are a remarkable source of natural products. Aloysia citrodora Paláu (Verbenaceae), commonly known as lemon verbena, is a relevant source of essential oils with potential applications due to its lemony scent and bioactive properties. Studies carried out on this species have focused on the volatile composition of the essential oil obtained by Clevenger hydrodistillation (CHD), with little information available on alternative extraction methodologies or the biological properties of the oil. Therefore, this work aimed to compare the volatile composition, antioxidant activity, cytotoxicity, anti-inflammatory and antibacterial activities of the essential oil extracted by conventional hydrodistillation by Clevenger (CHD) and Microwave-Assisted Hydrodistillation (MAHD). Significant differences (p < 0.05) were observed for some compounds, including the two major ones, geranial (18.7–21.1%) and neral (15.3–16.2%). Better antioxidant activity was exhibited by the MAHD essential oil in DPPH radical scavenging and reducing power assays, while no differences were observed in the cellular antioxidant assay. The MADH essential oil also presented higher inhibition against four tumoral cell lines and exhibited lower cytotoxicity in non-tumoral cells as compared with Clevenger-extracted essential oil. In contrast, the latter showed higher anti-inflammatory activity. Both essential oils were able to inhibit the growth of eleven out of the fifteen bacterial strains tested.