Waste source separation has been a social dilemma globally with a low participation rate. This research attempted to solve this dilemma by exploring the effect of mandatory (versus voluntary) policies on waste separation from the perspective of the self-versus based on deterrence theory and self-enhancement motivation. Hypothetical scenarios were used to demonstrate the effectiveness of mandatory policies and self-enhancement bias for residents (n = 589) and adolescents (n = 121). Study 2 was performed to replicate the findings of Study 1 with a no-implementation policy condition, and Study 3 extended the findings to adolescents. We found robust self-enhancement bias, where participants perceived themselves to be better than others in both willingness to perform and attitudes toward waste separation behavior. Specifically, participants tended to perceive themselves to perform waste separation well when policy compliance was voluntary, but they tended to perceive others to perform well when policy compliance was mandatory with supervision. These findings highlight the impact of mandatory policy with supervision and self-enhancement bias in waste management. The present studies provide substantial evidence and implications for the necessity of supervision in mandatory policy implementation.