The rapidly changing fashion sector is under increasing pressure to embrace environmentally conscious practices. Consumers have also become mindful of ecological issues and are prepared to spend more for apparel that is sustainable. Immersive technologies such as Metaverse and Generative AI have made it possible for the fashion industry to cut down on wasteful production and lower carbon footprint. The Metaverse is a 3D virtual realm that leverages technologies such as Virtual Reality and Augmented Reality to allow users to interact and have shared experiences online. This gives designers’ boundless creative freedom to experiment with novel ideas without being constrained by physical limitations. A subfield of AI called “generative AI” is capable of producing new text, graphics, audio, videos, and code. Designers can create original digital pieces with the help of generative AI that can be virtually exhibited on Metaverse. The creation of virtual garments will considerably help reduce stock wastage and overproduction, as designs can be customized. This study attempts to analyze the advantages, challenges, future scope, and risks of integrating generative AI and Metaverse into the fashion system through literature, review, case studies and a survey. The findings revealed that the new technologies present an opportunity to keep bringing innovation and creativity in our lives without exploiting and exhausting natural resources. Nevertheless, there are still issues that need to be resolved, such as the high-energy consumption to run digital and cryptocurrency platforms and making the integration of AI accessible and affordable.