This paper presents the development of a reverse vending machine (RVM) with shredding features that can shred the polyethylene terephthalate (PET) bottles. Plastic waste such as plastic bottles and plastic containers are often being thrown into landfills. Dustbins are overflowed due to these used bottles occupied very large space. Used plastic bags and plastic bottles in different sizes are found scattered in the streets, gutters, and even in drains causes a significant environmental threat. A reverse vending machine is a machine that accepts empty beverage containers and returns money where it helps to encourage user to recycle. The returned PET bottles are shredded into smaller pieces for the use of next recycling process. The hardware is equipped with capacitive sensors that will detect bottles, status display by using Liquid Crystal Display (LCD) and all major process will be controlled by Arduino UNO. The microcontroller will send the signal to activate both motors which are (direct current) DC motors that will actuate the shredding process and coin dispensing respectively. This PET shredder RVM is capable to shred the standard size of empty PET bottles and consumers will be rewarded with amount according to number of bottles inserted. Since it is in a form of vending machine, it is suitable to be placed near the streets, buildings and convenience stores. Positively, the project can benefit the consumers in a way that they do not have to go to recycle centre to recycle PET bottles to the shredded form of plastic.