The building sector is amongst the major resource consuming and waste generating sectors of the economy. The paradigm of the circular economy has the potential to overcome the problems resulted due to adoption of the linear economic model by the building sector. The circular economy offers a new perspective for industrial ecosystems including materials and products being fed back into the supply chain as resources, thereby resulting in reduced consumption of primary resources and waste generation. The research on circular economy increased rapidly during recent years; however, a research gap exists on the assessment of current state and barriers to the circular economy in the building sector of developing countries. This study has developed and used a circular economy assessment scale for the building sector of developing countries. It is found that the current state of circular economy implementation in the building sector is unsatisfactory. Out of the seven circular economy dimensions used for analysis, the energy dimension showed the best performance and the waste dimension showed the worst performance. Serious steps are required by all the stakeholders of the building sector to improve the adoption of the circular economy. Furthermore, interpretive structural modeling (ISM) and matrice d’Impacts croises-multipication appliqué an classment (MICMAC) techniques are used to identify and classify the key barriers to the circular economy. It is found that a lack of environmental regulations and laws is driving the rest of the barriers to the circular economy. Equally critical is the lack of public awareness and support from public institutions. Finally, a mitigation framework for the building sector of developing countries is proposed, which is an addition to the circular economy existing body of knowledge. The proposed framework could serve as a guideline for decision and policymakers.