Traditional methods of wastewater treatment, in the past, have aimed at removing pollutants and compliance to regulations as a result of which have proven to be inefficiency and resource wastage. Nevertheless, growing demands of water scarcity, climate change, and requirements to adopt a circular economy have fuelled the shift into next-generation biological processes, which redefine the concept of wastewater as a resource, as opposed to a waste stream. This review assesses critically emerging paradigms in biological treatment that go beyond traditional activated sludge systems and incorporate the new developments in the fields of microbial ecology, synthetic biology and bioelectrochemical systems and nature-inspired engineering. Special focus is made on new microbial consortia, designed metabolic routes, and system-wide process advancement that allow the recovery of nutrients, generation of bioenergy, and the manufacture of value-added biochemicals in a better way. The article also assesses the role of hybrid biological systems in the treatment of wastewater under energy-neutral or energy-positive processes, including microbial electrochemical systems and algae-bacteria systems. The problem of techno-economic feasibility, operational resilience, and scalability are discussed systematically to reduce the gap between the innovation over the laboratory scale and its application in the real world. This article identifies the key gaps in knowledge, regulatory issues, and barriers to integration that may not be able to be easily adopted since they point to the recent advances in various fields. Finally, the review also provides a future-based structure of planning sustainable wastewater treatment processes in accordance with a circular bioeconomy, with future-generational biological processes being the core elements of the future water infrastructure in cities and industry.