Waste segregation is a vital step in every aspect of Municipal Solid Waste Management. Its implementation is crucial and poses several challenges due to inadequate infrastructure and awareness. Every municipality should adopt effective waste segregation practices tailored to its location and waste characteristics for effective waste recovery and recycling. Kohima, an unplanned hill city in the Northeastern region of India, faces immense challenges with unsatisfactory waste segregation and collection systems. Being developed as a smart city under the Government of India’s Smart City Mission, sustainable and efficient waste management needs to be ensured as one of its vital infrastructure development constituents. This study, of utmost importance, delves into the existing solid waste management practices and challenges in Kohima. Its primary aim is to develop and implement a sustainable waste management system, a crucial step towards the city’s development and environmental sustainability. A field survey was conducted for data collection, and secondary data were sourced from literature and the Kohima Municipal Council. A Geographical Information System (GIS) was used for the spatial analysis to identify the potential development of Decentralized Material Recovery Facilities (DMRFs) and determine the best framework for improving the waste management infrastructure in the city. The research has revealed that community-based decentralized MRFs hold immense potential. They not only promote waste segregation at the source but also achieve higher waste recovery and recycling rates. This approach can significantly reduce the waste going to landfills and the associated transportation costs. Moreover, it provides a unique opportunity for income generation, particularly for the low-income groups, thereby fostering a sense of community empowerment. An integrated system comprising MRF, composting, and landfilling could be a sustainable solution to improving the existing waste management problem in Kohima.