Plastic waste management has emerged as a critical global environmental crisis, particularly in developing countries such as Timor-Leste, which is currently undergoing rapid urbanization and economic growth. The daily increase in municipal solid waste (MSW) volume in Dili reaches hundreds of tons, with a significant portion disposed of at the Tibar Landfill, which operates with minimal environmental safeguards. Reliance on a linear "take–make–dispose" economic model has led to massive plastic waste accumulation, posing serious threats to ecosystems and human health. Although the government has initiated recycling efforts, such as converting plastic waste into paving blocks through entities like Caltech, the scale of the problem far exceeds the available solutions. This study analyzes the reverse logistics flow model in plastic waste management in Dili City, identifying key factors along the supply chain from consumers to recycling facilities and evaluating the effectiveness of source-level waste sorting and its critical points. Data reveal that household waste dominates the total waste generation in Dili (231.9 tons), with plastic contributing a significant portion. Waste separation at the source remains highly ineffective, as evidenced by the prevailing public behavior of indiscriminate waste disposal. The primary bottlenecks include a lack of awareness, insufficient public outreach, and the absence of formal integration for informal sectors such as scavengers and waste banks. However, there is notable potential in converting organic waste into electrical energy (estimated at 0.06 MW from methane emissions) and transforming inorganic waste into paving blocks.