LAN Manager (LM) hashes are legacy password hashing methods used in older Windows systems (including Windows 2000 for backward compatibility). LM hashing works by:

Converting the password to uppercase.

Padding or truncating it to 14 characters.

Splitting it into two 7-character halves.

Using each half as a DES key to encrypt a known constant ("KGS!@#$%").

Therefore, LM hashing uses the DES (Data Encryption Standard) algorithm.

From CEH v13 Official Courseware:

Module 6: Malware Threats → Password Storage and LM Hash Structure