Over the past decade, the concept of a circular economy has increasingly gained attention as a framework for guiding businesses and policymakers. Given its significant environmental impact, the building industry plays a pivotal role in the transition toward a circular economy. To address this, our review proposes a bio-based building material, specifically straw bale, which elaborates on the circularity of bio-based buildings based on the 3R principles of a circular economy: reduce, reuse, and recycle. In terms of the “reduce” principle, straw-bale buildings can reduce construction waste, the environmental impact, energy requirements, and carbon emissions. Regarding the “reuse” principle, straw-bale buildings utilize agricultural waste resources and are easily disassembled due to their prefabrication. As for the “recycle” principle, straw-bale buildings can undergo physical, biological, and biochemical conversion processes (thermochemical conversion), yielding both wooden composite boards and potential biogas and biomass fuels for electricity and heating. This study evaluates the contribution of straw packaging construction and the use of straw as a raw material, using the 3R principles to determine future research opportunities for the construction industry to achieve a circular economy. The results of this study offer circular economy solutions and interdisciplinary research insights for researchers and practitioners interested in the building environment.