<p>Environmental law has evolved from a restrictive mechanism into a catalyst for innovation and sustainability. This article synthesizes research on the relationship between environmental regulation, Green Entrepreneurial Orientation (GEO), and Circular Business Models (CBMs) through a systematic literature review. This review addresses how environmental law shapes GEO and CBMs and identifies the mechanisms through which regulation fosters sustainable innovation. Drawing on institutional, stakeholder, and green entrepreneurship theories, the review highlights how legislation not only pressures firms to adopt sustainable practices but also creates opportunities for competitive differentiation. Findings reveal that GEO, when supported by absorptive capacity and managerial commitment, enhances green innovation and facilitates the integration of CBMs. At the same time, stakeholder pressure, governmental incentives, and social networks act as moderating forces that strengthen regulatory outcomes. This review contributes a holistic framework by integrating legal, entrepreneurial, and circular business economy perspectives, and identifies the internal and external factors that drive sustainability transitions. Thus, the review underscores the importance of aligning internal entrepreneurial strategies with external legal frameworks to achieve resilience, long-term competitiveness, and sustainability. It concludes by identifying research gaps and calling for stronger policy–practice synergies to accelerate circular transitions.</p>