For a submonoid S of a torsion-free abelian-by-finite group, we describe the height-one prime ideals of the semigroup algebra K S . As an application we investigate when such algebras are unique factorization rings. 2002 Elsevier Science (USA) Let S be a submonoid of a group. In this paper we investigate when prime semigroup algebras K S are unique factorization rings that satisfy a polynomial identity. In the case S is a group, Chatters [4] showed that this is the case precisely when S is a dihedral free group which satisfies the ascending chain condition on cyclic subgroups. Chatters' result is fundamentally based on an earlier result of Brown [2], who characterized group algebras of polycyclic-by-finite groups that are unique factorization rings. The mentioned results can be extended to arbitrary unique factorization coefficient rings (see [1]). In the case S is a commutative monoid, Gilmer in [11] described when K S is a unique factorization domain. This paper