<p>The rapid growth of the textile industry has manifested in significant environmental damage and societal issues. The study proposes Society 5.0, a human-centric societal concept, as an innovative approach to ensure social well-being while fundamentally reconsidering the textile industry toward a material circular economy. This concept has considerable potential to improve circularity throughout the textile supply chain by integrating smart technologies including human–robot collaboration, blockchain, artificial intelligence, and customized production. The paper observes how Society 5.0 can drive improvements in the textile materials’ lifecycle and recyclability, enhance eco-friendly manufacturing, and develop a transparent supply chain that reduces waste while increasing material value. However, the study also addresses challenges in transitioning toward a Society 5.0-driven circular textile industry such as the requirement for worker skill development, ensuring an adequate return on investment for new technologies, managing cyber security concerns, and negotiating necessary regulatory adjustments. The study recommends a holistic approach of government policies, incentives, and industrial collaboration with innovation hubs for the successful implementation of Society 5.0 in the textile industry. Such a holistic approach is critical for successfully implementing Society 5.0 concepts in the textile industry, facilitating its transition to a human-centric circular economy.</p>