This study proposes a general standard for the circular economy (CE), and estimates a multidimensional parametric index composed of eight components which is in line with the principles of a circular economy. The concept and index are used for evaluating the practices of a circular economy at the municipality level. The index is regressed on a number of indicators influencing the level and development of circular economy. The empirical analysis is based on data from 273 municipalities in Sweden observed 2012–18. The results suggest that there are significant differences between the municipalities in the CE index and its sub-components. Variations in the index's level are mainly attributed to their regional location, population size and density, concentration of industries, and investment programs in the circular economy's infrastructure. At a disaggregate level, the municipalities of Gotland, Härjedalen, and Mörbylånga performed well in the CE index. In contrast, Stockholm, Uppsala, and Burlöv municipalities had the lowest ranks in the CE index. The index had a growth rate of 9.7 percent over 7 years at an average annual growth rate of 1.3 percent. One policy implication of these results is that each municipality should implement a policy adapted to the sectorial structure of its economy and availability of resources. The central government should apply strict environmental regulations and provide necessary incentives for achieving environmental quality objectives. Incentive programs can target a wider application of technologies and policies used by the best performing municipalities and provide support in transferring knowledge and resources for strengthening the weak performing municipalities.