Vertical Farms (VFs) are still an emerging technology aiming to improve resource use efficiency of crop growing needs in a climate change context. Moreover, VF integration within cities through circular economy (CE) strategies is also in its infancy, and the their environmental impacts are still not fully understood. This study conducted an LCA of two commercial VFs to evaluate how CE strategies can improve environmental performance, considering their distinct characteristics, maturity levels and geographical context: Spain and Sweden. Several takeaways stand out from this assessment: First, energy use is the primary contributor to environmental impacts, accounting for 70% of all impacts in VF1 (Barcelona) and 57% in VF2 (Stockholm) at the current VFs status, with variations attributed to energy efficiency and sourcing. Second, the implementation of CE strategies provided considerable potential but context-dependent benefits when enhancing the environmental sustainability, with reductions of ∼20% from linear to current systems and up to ∼30% in future scenarios in terms of GW impacts. Strategies such as closed-loop irrigation, material recycling, and waste heat reuse consistently reduced impacts, particularly in marine eutrophication (up to 36% in VF1 and up to 77% in VF2). However, not all strategies are universally beneficial due to geographical and technological differences: for example, photovoltaic integration improved impacts in VF1 but increased them in VF2, highlighting environmental trade-offs. Thus, circular strategies and its derived context-specific environmental impacts should be jointly assessed to ensure resource circularity does not worsen environmental impacts. Finally, results showed that environmental improvements in the foreground reflect the maturity level of the VFs, but their effectiveness depends on the state of background systems as well (i.e., the broader changes in upstream production systems). VF1 CS showed a lower maturity level, with environmental reductions of 10% to 61% in GW, ME, CED and TA impacts compared to LS. However, it also showed higher potential for improvement through additional CE strategies within the IS. In contrast, since VF2 is already operating in a low-environmental impact electricity grid, it exhibited limited gains and even burden shifting for some interventions. This demonstrates that advancing VF sustainability requires aligning foreground technological improvements with background system conditions, as improvements in one without the other may limit or counteract overall environmental benefits. Overall, this study highlights the importance of combining CE strategies with a system-wide perspective to identify the most effective pathways towards the sustainable development of food systems.