<p>The global textile market has been rapidly growing, leading to a significant increase in textile waste generation. Over 80% of textile waste is managed through unsustainable methods such as landfilling and incineration, with only about 10% being recycled. This review explores various recycling methods—mechanical, chemical, biological, and thermal—and addresses the challenges posed by mixed fiber compositions, quality degradation, limited policy support, and lack of consumer awareness. It also emphasizes the integration of advanced recycling technologies into a sustainability framework and highlights practical barriers to scalability, such as the economic feasibility of recycling processes and the limited market demand for recycled fibers. Furthermore, the review emphasizes the importance of systemic changes, including collaboration among industries, policymakers, and consumers, to establish a circular economy. By combining technological innovation with strategic systemic approaches, this review provides actionable insights for reducing environmental impacts and promoting sustainability across the textile life cycle.</p>