The textile and fashion industry has had significant technological developments but is currently criticised for its environmental and social impacts and for being a major contributor to waste. The rise of the circular economy (CE) has promoted more sustainable concepts, including the trending of recycling strategies to add value to the textile and plastic waste. However, adding value to products and for users implies technical upscaling and clear communication about the benefits of recycling. This paper presents a systematic literature review (SLR) and explores the state of the art of recycled textiles (RT) and circular fashion (CF) as perceived by humans. The literature review was performed on the basis of journal articles, book chapters, and conference papers using the ScienceDirect (SD) and Web of Science (WoS) databases. The review identified that a significant proportion of consumers from different countries have a basic understanding of sustainable products but that there have been differences in consumers’ attitudes towards sustainable purchase, use, consumption, and post-purchase behaviour. Diverse and even contradictory results occurred concerning the relationships between RT and CF and their perceived product attributes in terms of quality and functionality, as well as social-cultural factors. Manufacturers’ and brands’ perceived values of RT were observed to be influenced by different factors on the basis of the recycling system and cultural values, while designer attitudes towards sustainability were observed to be influenced by external factors. This review contributes to the creation of three main implications in terms of environmental impact and awareness, including actions and concrete proposals for RT and CF.