<p>The paper explores the prospects of immersive and collaborative intangible cultural heritage (ICH) craft experiences as a therapeutic, cultural, and economic solution to the growing mental health issues, cultural disconnect, and sustainability pressures. A mixed-method study involving 158 participants (experimental and control groups) was carried out using design thinking and value co-creation. The ICH craft sessions, a six-week course, had a positive effect on the mental health and cultural identity of the participants with the help of virtual reality and artificial intelligence. The quantitative analysis showed that the experimental group had significant changes in the psychological well-being (<i>p</i> &lt; 0.001, <i>d</i> = 0.65) and cultural identity (<i>p</i> &lt; 0.001, <i>d</i> = 0.70), whereas the control group did not. The moderation analysis showed that the more the intensity of co-creation, the more the effects, which supported the main hypothesis that the more the participants are involved, the more the results. Moreover, the willingness to pay (WTP) of the experimental group was much higher (<i>p</i> = 0.011), which is the perceived economic value of the experience. Qualitative interviews and observations also supported these results and revealed the themes of emotional regulation, cultural reconnection, empowerment, and digital engagement. Therefore, the new framework created by the interdisciplinary research team views ICH crafts as the origin of therapeutic innovation, cultural preservation, and sustainable creative economies that can be easily scaled up.</p>