Various frameworks have been developed to guide organisations in embedding circular economy principles in their strategy and operational practice. However, there is a lack of studies analysing practical implementation of circular economy thinking in the higher education sector. Higher education institutions are strategic agents in supporting sustainable development through teaching, research and social outreach activities. They also represent a source of environmental impacts due to significant resource consumption and waste generation. This paper presents the first comprehensive study showing how higher education institutions can use an action-led step-by-step approach to build a business case and implement circular economy thinking in practice. The University of Manchester is used as an illustrative example of a large higher education institution. First, a background analysis and semi-structured interviews were carried out to determine the scope of the university's current sustainability policies and the ability of the management systems to respond to circular economy challenges. This was followed by stakeholder workshops to identify gaps and opportunities for building a business case for implementation of a circular economy. Finally, a critical assessment of the outcomes was carried out to identify further research needs for implementation of a circular economy in higher education institutions. Although focused on the higher education sector, the proposed action-led approach can be used by any organisation in the service sector looking to build more circular and sustainable business models.