Higher sustainability is the tireless pursuit of product design/development. To achieve it, relevant strategies, namely Reconfiguration, Remanufacturing, Reuse, and Recycle (4R) of the tangible materials and components, are widely discussed in the physical aspect. Nevertheless, few works concern a sustainable manner to exploit high-value and context-dependent information/knowledge assets in the cyber aspect, in the emerging paradigm of Smart Product-Service System (Smart PSS). To fill this gap, based on the principles of transdisciplinary information/knowledge management, this paper proposes a closed-loop context-aware framework for sustainable Smart PSS development. Four steps, including requirement elicitation, solution recommendation, solution evaluation, and design knowledge evolvement are conducted based on the context-aware scenario encoding. As an explorative study, it is hoped that this work provides useful insights for Smart PSS development with sustainability concerns in both physical and cyber spaces.