The inclusion of the informal recycling sector (IRS) in a circular economy (CE) is challenging and it is gaining increasing attention by the academic community in an exponential yet fragmented way. In this narrative review, we demarcate the direct and indirect contributions of the IRS to various domains of the CE by drawing knowledge from relevant literature. First, we capture the modi operandi of different forms of recycling value chains into a typology. We do so based on distinct foci and policy approaches towards the IRS which have been adopted across different countries. Second, we synthesize various threads of information on reported forms of collaboration, tensions, and challenges in the context of urban waste management, into a conceptual framework to facilitate transitions towards circular and inclusive wise-waste systems. Finally, we discuss important aspects related to circular business models and integration approaches towards the IRS, and we propose avenues for further research.