In many regions, including the Kingdom of Saudi Arabia, municipal solid waste is still landfilled without energy or material recovery, resulting in environmental degradation and economic losses. This study evaluates the feasibility and economic potential of integrating composting of organic food waste (OFW) into a circular economy framework, using the City of Jeddah as a case example. The analysis quantifies the financial and environmental benefits of diverting OFW from landfills to a composting facility, including savings from avoided tipping fees, carbon credit gains from reduced methane emissions, and revenues from compost sales and its nutrient substitution value (carbon, nitrogen, phosphorus, and potassium). OFW generation in Jeddah is projected to rise to 1.30 Mton by 2030 due to rapid population growth and urbanization, providing the capacity to produce approximately 0.27–0.32 Mton of compost annually between 2015 and 2030. The proposed system not only mitigates ecological impact but also contributes substantial economic value, with estimated compost sales revenues of MSAR 284–341, environmental savings of MSAR 728–875, and fertilizer replacement benefits of MSAR 87–105 over the study period. By 2030, the composting strategy demonstrates the potential to deliver a net contribution of MSAR 1321 to the national economy. These findings highlight composting as a viable circular economy solution capable of closing material loops, reducing environmental burdens, and generating sustained economic returns for Saudi Arabia’s waste management sector.