The Open Innovation (OI) increases knowledge flows, accelerates the innovation processes and increases the benefits produced by the innovation itself. It is generally considered as a fundamental tool for the development of the circular economy. In line with this, the aim of this study is to investigate the possible connection between knowledge management (KM) and circular economy (CE), within the open innovation practices. To accomplish this aim, we adopted the Grounded Theory (GT) approach to investigate OI practices linked to CE, partnerships and benefits declared by companies. Italian firms have been adopted as a research context. Those selected for the analysis have started to redesign their production systems or carried out radical innovations to achieve the goal of obtaining the decoupling of economic growth from the depletion of natural resources. The results of the study show that the selected firms apply collaborative innovation practices, confirming the existence of a relationship between OI and the EC. The size does not seem to affect the type of OI, while with reference to the industrial businesses, OI practices are concentrated on few ones. By far, the OI coupled practices are the most numerous and it emerges that there are more companies that introduce innovation into the external context than those that use the external environment to acquire knowledge. In addition, findings show a difference in the benefits achieved on the basis of the category of partners involved in the innovative initiatives. According to the results, we identified three research hypotheses which will be explored in a second step of the analysis. The paper deals with an emerging issue and can foster a better understanding of the drivers, in terms of KM practices, for the development of the circular economy through the OI. Although this study is an explorative analysis of a sample of Italian circular firms, it offers academic and institutional implications regarding the debate on the circular economy at a micro-level. Understanding the experiences that companies are already having can represent a further step for the achievement of a new economic model, stimulating and fostering the implementation of the circular economy at a micro-level, and leading to policies that support the development of circular innovation.