The construction sector has undergone several transformations to address adverse environmental, economic, and social impacts. The concept of the circular economy (CE) has transcended into this domain to solve the needs of construction amid resource constraints. Furthermore, advanced digital tools are being implemented across industries owing to the boost given by the fourth industrial revolution. This paper aims to develop a framework that investigates the effect of digital tools on CE implementation in the construction sector. The study is based on a three-step approach, where first, an initial framework design based on a systematic literature review was conducted. This is followed by framework optimization using semistructured interviews with experts and validation through a case study. This study resulted in the development of a new framework, which aims to investigate how advanced digital tools can be used in the construction sector to enhance CE implementation. The contribution of the present study is two-fold: (1) the integration (addressing existing research gap) of CE and digitalization concepts in the construction sector; (2) an investigation into the critical barriers, offering insights for construction practitioners.