The circular economy aims to maximize economic benefits with minimal resource and energy consumption and pollution emissions. This paper proposes a novel concept of household distributed energy system based on hydrogen energy cycle suitable for residential areas is proposed. This circle includes the separation of hydrogen from blended hydrogen-natural gas, natural gas heating, hydrogen fuel cells for a power supply, and hydrogen production recycling from household solid waste. This system builds an economic system of green and low carbon hydrogen energy cycle, improves the utilization rate of hydrogen energy, reduces waste and saves material resources and energy resources. The circular economy framework proposed in this paper finds a new way to utilize the natural gas-hydrogen blended to satisfy household energy demand and generate a close energy cycle. The case analysis proves that this framework contributes to sustainable resource utilization and reduces environmental footprints. Besides the development of this new system, this paper also reviews the latest technologies related to each part of the system, and explores a new hydrogen residential energy recycling economy framework.