Textile is one of the most polluting and resource depleting industries. Fuelled by fast fashion, huge amount of post-consumer textile waste is generated globally which mostly go to landfill or incineration, thwarting the implementation of circular economy. Mechanical recycling is a very facile way to bring back post-consumer textile wastes into the main value chain. However, the quality of recycled products is often inferior to that of their virgin counterparts. To overcome this challenge, this research presents a systematic approach to convert post-consumer textile (denim) waste into knitted fabrics having properties comparable to that of virgin products. First, post-consumer denims were mechanically recycled and spun into yarns. Different ratios (0/100, 33/67, 50/ 50, 67/33 and 100/0) of recycled denim yarn (r-denim) and virgin cotton yarn (v-cotton) were then used through a novel course mixing technique to make knitted fabrics. To elevate the quality of knitted fabrics made from recycled yarns, a silicone softening treatment was applied. Environmental benefits of the proposed approach were evaluated by life cycle assessment (LCA) considering cradle-to-gate system boundary and cut-off approach. It was found that in mechanical recycling, spinning of recycled fibres is the most critical process for global warming, followed by shredding and waste management. Sensitivity analysis demonstrated that the source of electricity significantly influences most of the environmental impact categories. . Scenario analysis revealed that employing 50% recycled fibres in garments can significantly reduce global warming, abiotic depletion, acidification potential, and other environmental impacts. Thus, this research paves the way to reduce the need for virgin materials and mitigate the environmental impacts of the textile industry.