Industry evolution has moved toward Industry 5.0, embodying a synergy between human perception and emerging technologies, while strongly emphasizing sustainable growth and innovation. This gives a chance for the SMEs to adapt to the practices of circular economy which in turn enhances its efficiency by reducing wastages in terms of promoting eco-friendly environment thus maximizing the utility of resources. The incorporation of Artificial Intelligence (AI), Internet of Things (IoT), and Robotics with circular economy supports the Small and Medium Scale Enterprises (SMEs) to enhance the ability of operation and supports them to sustain the competition and set their strong foot in the market for a long time. Industry 5.0 has given a platform to develop Human–Machine interface models to upgrade the operations in small and medium-sized enterprises (SMEs). This chapter explores interdependence of Industry 5.0 and circular economy. It also focuses on the opportunities that provide a dominance to the small and medium enterprises (SMEs) by this integration. SMEs can have a paradigm shift from the traditional processes to modern manufacturing systems thus attaining sustainable growth. The concepts of Industry 5.0 and Circular Economy make small and medium-sized enterprises (SMEs) socially and economically viable. The study provides inputs to succeed in this competitive Industry 5.0 environment.