Toilet paper represents a continuous and globally ubiquitous stream of cellulosic waste introduced into sanitary systems, with annual consumption exceeding 83 million rolls worldwide. Although cellulose — the primary structural component of toilet paper, comprising 60–90% of its dry mass — is theoretically biodegradable, accumulating evidence demonstrates that cellulose microfibers persist in aquatic environments and currently account for 60–80% of all microfibers found in the world's oceans. This review synthesises current knowledge on the environmental fate of toilet paper waste, examining its role as a dual source of cellulose microfibers and per-and polyfluoroalkyl substances (PFAS) in municipal wastewater systems. We assess the structural and compositional factors governing cellulose biodegradability — including crystallinity, lignin content, and the presence of wet-strength resins such as polyamidoamine-epichlorohydrin (PAE) — which collectively reduce hydrolysis rates by 30–50% underenvironmentally relevant conditions. Cellulose microfibers released from toilet paper (typically 1–3 mm in length, 10–50 µm in diameter) are incompletely removed in conventional primary treatment, with gravitational sedimentation achieving only 30–50% retention. Advanced mechanical separation technologies, including microscreens and rotating belt filters (RBF), increase cellulose recovery to up to 95% and can reduce total energy consumption by at least 40%. However, a critical technological barrier to circular economy implementation is identified: while these systems enable efficient cellulose recovery for valorisation — as biogas feedstock, construction materials, or thermochemical products — they simultaneously concentrate PFAS contaminants in the recovered biosolids. Toilet paper contributes 35–89% of the 6:2 diPAP load entering European wastewater treatment plants. This PFAS co-concentration undermines the safe reuse of recovered materials and necessitates integrated treatment strategies combining separation (adsorption, ion exchange, membrane processes) with destructive technologies (electrochemical oxidation, cold plasma, advanced oxidation processes). These findings highlight a fundamental tension between resource recovery and contaminant control that must be resolved to advance sustainable wastewater management within a circular economy framework.