This chapter critically discusses the literature on the subject of circular economy. It defines the circular economy at the outset and advocates its adoption in smart cities. It briefly explains the multiple phases of industrial revolution and the slow and gradual shift from a linear economy which is based on make-use-dispose model to a circular economy which relies on reusing and recycling the products produced in the production cycle. It then critically examines the legal challenges that can be associated with such a system. It draws on the lessons learnt from cities such as Amsterdam which has successfully implemented the system of circular economy. This chapter also delves into the Columbian waste management system to understand the market functioning in the waste management sector which is handled by private enterprises in the country. Moreover, the public–private partnership model in the Chinese city Suzhou is explored, and exciting methods of using this model were found.