Circular economy aims at decoupling human activities from resource use and creating wealth. However, many have questioned the link between increased circularity and sustainability, resulting in several methodological approaches being developed to answer that question. This article analyzes and discusses the insights gained from applying agent‐based modeling and simulation to study the techno‐economic and social conditions promoting circularity and sustainability. This article analyzes the benefits and limitations of this technology and discusses future methodology developments within the circular economy context. Moreover, six limits of the circular economy concept are used to interpret insights from the literature: thermodynamic limits, system boundary limits, limits posed by the physical scale of the economy, limits posed by path dependencies and lock‐in, limits of governance and management, and limits of social and cultural definitions. Promising research avenues are to use this methodology with machine learning, industrial ecology methods, and detailed geographic information.