Purpose: The textile industry faces major challenges in reducing environmental impacts along the whole value chain. The overall aim of this paper was to assess the potential environmental benefit of a circular textile value chain, by evaluating a garment partly made from a chemically recycled cellulose carbamate fibre. The cellulose carbamate technology is a novel technology that turns cotton-rich textile waste into a cotton-like regenerated fibre. Methods: Life cycle assessment was performed to evaluate the environmental impacts of a garment made from the chemically recycled fibre, considering the whole life cycle. The evaluation also considered that the garment was part of a take-back system, meaning that the garment is collected for recycling after consumer use and thereby helps in closing the loop of the circular textile value chain. The focus of the assessment was on climate impact, water scarcity impact and land use impact. Furthermore, sensitivity analyses were included to test parts of the European Commission’s product environmental footprint method, e.g. the impact of applying the circular footprint formula. Results and discussion: The results showed that using a recycled cellulose carbamate fibre over primary conventional cotton showed benefits in all considered environmental impact categories; compared to organic cotton, the benefits were also shown for the land use impact category; the cradle to gate processes were the main hotspots for the garment’s life cycle, meaning that using a recycled feedstock is not the only measure needed to reduce environmental burdens;  the use phase, and in particular using the garment to its full life length, is crucial for mitigating the environmental impact per garment use; and methodological choices related to the use of recycled feedstock, and sending materials to recycling at end-of-life, affect the outcome of the study. Conclusions: Selecting a chemically recycled cellulose carbamate fibre over primary fibres showed environmental benefits for the evaluated garment, but there are however trade-offs between different environmental impact categories and fibre types. Furthermore, using recycled fibres is one important step in reducing the environmental concerns of garments, but it is important to also make improvements along the whole textile value chain.