In this paper, a circular-economy framework is applied to the prefabricated building sector to explore the environmental advantages of prefabrication in terms of reduction, reusability, adaptability, and recyclability of its components. A qualitative approach is used to revisit the design, construction, and demolition stages of prefabricated buildings; in so doing, the circular-economy framework is applied to foster circular prefabricated modi operandi. Prefabrication of buildings can be divided into four entities: elements and components, panels (or non-volumetric elements), volumetric, and entire modules. Through an analysis of published research on how the circular economy can be applied to different industry sectors and production processes, seven strategies emerged, each of which revealed the potential of improving the circular economy of buildings. The first strategy is reduction of waste through a lean production chain. By reusing the waste, the second strategy investigates the use of by-products in the production of new components. The third strategy focuses on the reuse of replacement parts and components. The fourth strategy is based on design toward adaptability, respectively focusing on reusability of components and adapting components for a second use with a different purpose. Similarly, the fifth strategy considers the implications of designing for disassembly with Building Information Modeling so as to improve the end-of-life deconstruction phase. The sixth strategy focuses on design with attention to recyclability of used material. Finally, the seventh strategy considers the use of tracking technologies with embedded information on components' geometric and mechanic characteristics as well as their location and life cycle to enable second use after deconstruction. It is demonstrated that prefabricated buildings are key to material savings, waste reduction, reuse of components, and various other forms of optimization for the construction sector. By adopting the identified strategies in prefabricated buildings, a circular economy could be implemented within the construction industry. Finally, seven guidelines were distilled from the review and linked to the identified strategies. Owing to their degree of adaptability and capacity of being disassembled, prefabricated buildings would allow waste reduction and facilitate a second life of components.