This study presents the options for source-segregation and selective collection of recyclable waste fractions for Cetinje, Montenegro, with the aim of meeting the European Union 50% waste recycling target in 2023, and extending collection and disposal system that builds on the existing strengths of the city. To this end, three options were considered: (1) source separation and separate collection of dry recyclable materials and central sorting of residual waste; (2) source separation and collection of co-mingled dry recyclable materials, and central sorting in a clean material recovery facility of comingled recyclables and central sorting of residual waste; (3) collection of mixed waste (current situation) and subsequent central sorting. Scenarios 1 and 2 were found to meet the European Union 50% recycling target in 2023, provided that a fast implementation of the new separate collection schemes to fine sort the co-mingled collected recyclable materials is available. Finally, a financial evaluation was made for the options and the investment and operational costs over a 20-year period were estimated. Unit costs for Scenario 3 were found to be lower than for Scenario 1 and 2. As Scenario 3 will not meet the future European Union recycling targets, Scenario 2 has been pointed as the most feasible scenario for Cetinje, with reference to the expected lower total costs compared with Scenario 1.