In recent years, many countries are promoting circular economy (CE) practices in the manufacturing and service sectors. Medical waste management has traditionally relied upon a linear economy for many years and requires transformation to CE. The reason for transitioning towards CE can be attributed to various ecological and economic drawbacks of the linear economy. Excessive production and dumping of wastes are polluting our environment. Moreover, scarcity of raw materials and growing demand increases the price of goods, eventually affecting global markets. However, only a few studies deliberate the challenges while implementing CE in the medical waste industry. This paper presents the potential challenges for the implementation of CE in medical waste management. The challenges were determined by an extensive literature review. A set of 85 responses was collected from industry experts through a questionnaire survey. Using exploratory factor analysis, the challenges were clubbed into six groups. A fuzzy theory‐based decision‐making trial and evaluation laboratory technique was used to prioritise and construct interrelationships among the main challenges. It is found that the most significant challenge is reprocessing difficulty, which is followed by a lack of transportation and infrastructure. This research covers the major challenges in adopting the CE across medical waste management and will benefit organisations in adopting CE practices for sustainable development. In addition, the limitations and future scope of the study are discussed. This study can further be improved by addressing the challenges while implementing the solutions mentioned in this study.