Water scarcity and energy consumption are two pressing global challenges, especially in arid regions, that require sustainable solutions in line with circular economic principles. This study investigates the feasibility of greywater recycling systems for a 10-floor residential building housing 425 occupants by optimizing non-potable water demand and energy consumption. The grey-box modeling approach and energy balance optimization analysis are used to identify effective practices for implementing greywater recycling through the evaluation of environmental and economic effects on the performance of residential buildings. The findings are that there are 18% and 40% savings in water and energy, respectively, with greywater recycling systems. The research concludes that maximum treatment and recovery efficiencies significantly enhance the performance of the systems. Thus, there are 2.25 million kWh of annual energy savings that can repay itself in 4.42 years, as well as savings in the long-term consequences. These findings contribute further to achieving the UN-SDGs on Clean Water and Sanitation (SDG 6) and Affordable and Clean Energy (SDG 7). This study contributes to a better understanding of optimizing greywater recycling systems that are practical and scalable for residential use and promote sustainable urban development with minimal environmental impacts.