Textile waste is a new waste category, and there is a lack of research on the quantity and quality of textiles in the municipal waste stream. Textile quality analysis (i.e., the condition of the item and its fibre content) is particularly time-consuming and requires specific textile and grading knowledge; however, it is essential in determining possibilities for reuse and recycling. Likewise, there is a lack of methods for conducting textile waste assessments. This study presents a novel procedure for assessing textile waste, starting with a definition of textile waste from the perspective of the circular economy and waste management. The assessment procedure uses textile collectors for categorizing and grading textiles, and categorizes textiles into six categories and 44 sub-categories. The researchers analyzed 1767.6 kg of textile waste or 10,716 items, collected from Ontario municipalities over three periods from 2019 to 2020. Textiles made up 4.4% of the residential waste stream. Based on 2018 data on Canadian waste generation, we estimate that Canada-wide, this would result in 462,704 tonnes of textile waste, or 12 kg of textile waste per person. We found that 65% of this waste could be reused, and 21% recycled. Diverting this waste would result in large environmental benefits and economic savings. Currently, managing this waste is expensive and represents a missed opportunity to utilize materials that could have either been reused or recycled. We conclude that there are opportunities for increasing the circularity of textiles through various waste diversion programs in Ontario.