["Business Strategy and the Environment, EarlyView. ", "\nABSTRACT\nThis study investigates whether and how industrial robot adoption enhances firms' circular economy (CE) capabilities. Based on OSCM literature, we conceptualize CE capability as a multidimensional construct comprising green process, resource looping, and life‐cycle management capabilities. Using panel data on Chinese listed firms from 2010 to 2019 and text analysis of corporate ESG reports and drawing on dynamic capability theory to frame the relationship, we find that industrial robot adoption has a significant positive effect on firms' CE capabilities. Moreover, this positive relationship is strengthened by exploitative innovation strategies and is more pronounced among nonstate‐owned enterprises and heavily polluting industries. This study provides empirical insights into how automation technologies enable circular transformation, offering implications for managers and policymakers seeking to align technological upgrading with sustainability goals.\n"]