<p>The growth of urbanization and industrialization has led to a greater accumulation of plastic in municipal solid waste, highlighting the critical need for innovative solutions to handling environmental issues. The present paper aims to carefully evaluate all parameters affecting the hydrothermal carbonization (HTC) of plastic waste and the associated challenges, and makes suggestions to mitigate these challenges and determine the future directions of research. It also aims to explore the use of HTC in real-world scenarios and policy while also investigating the decomposition mechanisms of commonly used polymers through this process. Despite its numerous advantages, HTC faces several challenges, including a lack of standard methods, difficulty treating mixed plastic waste, high nitrogen content of hydrochar, lack of kinetic data, issues related to product separation, ash content in hydrochar, energy demand, inconsistent product quality, and environmental issues with by-products such as process water. This paper offers solutions to mitigate the adverse effects and address the challenges. HTC, rather than other thermochemical processes, could affect real-world scenarios and policy by addressing non-recyclable plastics, promoting energy recovery, mitigating environmental contamination, aligning with sustainable development goals, and facilitating collaboration between public and private sectors. Future research should focus on standardizing reaction conditions, making cost-effective catalysts, integrating with other waste management methods, building modern reactors, managing feedstock, improving products and by-products, using circular economy principles and policy frameworks, and piloting and implementing HTC processes on an industrial scale. This will make HTC processes more scalable and long-lasting.</p> Graphical Abstract <p></p>