Grapefruit (GF) processing generates significant nutrient and economic losses due to the production of 50% by-products, primarily peels. GF peels are a rich and sustainable source of bioactive compounds (BCs), such as essential oils (EOs) and phenolic compounds. Thus, finding value-added solutions based on a circular economy is paramount. This research aims to assess the antioxidant, anti-inflammatory, and antimicrobial properties of a hydroethanolic polyphenol-rich extract from crude GF peels (GF-CE), essential oil (GF-EO), and polyphenol-rich extract from GF peels after essential oil extraction (GF-PE). The GF-CE and GF-PE showed high concentrations of naringenin (7.71 and 48.60 mg/g dry extract (DE)), narirutin (15.03 and 28.73 mg/g DE), and hesperidin (0.67 and 0.29 mg/mL), respectively. Extracting firstly EOs from GF improved the release of phenolic acids (p-coumaric, ferulic, and chlorogenic acid). The GF-CE exhibited stronger free radical scavenging activity mainly in DPPH (IC50 = 75.69 ± 0.81 µg/mL) than GF-EO (1271 ± 0.85 µg/mL) and GF-PE (113.45 ± 0.85 µg/mL). The GF-EO demonstrated moderate antimicrobial activity against Gram-positive bacteria compared to the reference standard (amoxicillin) and strong activity against the yeast Candida albicans (inhibition zone of 16 mm). The major compounds in the GF-EO included D-limonene (25%), nootkatone (24%), and β-pinene (8%). Both polyphenol-rich extracts showed promising activities as COX1 and COX2 inhibitors with IC50 values of 25 ± 0.1 and 0.28 ± 0.00 µg/mL (compared to celecoxib (97.5 ± 0.1 and 0.31 ± 0.01 µg/mL) and indomethacin (6.25 ± 0.00 and 0.52 ± 0.01 µg/mL) as the standards), respectively. The study concludes that GF peels are a valuable source of BCs with significant bioactivities, offering a sustainable multi-cascade approach to recovering value-added compounds from GF peels in alignment with circular economy principles and open opportunities as functional ingredients for food applications.