The global textile industry is still working under a linear system known as take, make and dispose. This system is associated with environmental damage and different social problems. The current pattern leads to high use of natural resources, pollution in land and water bodies, and a huge amount of textile waste. Because of this, there is a strong need to move towards circular and sustainable methods to reduce these harmful effects. This book chapter discusses how sustainable practices have gradually evolved in the textile industry and focus is given on innovative resource utilization as a key approach towards achieving sustainability. Under material innovation, several practices such as utilization of agricultural residues, development of textiles from fungal mycelium and marine algae, chemical recycling of post-consumer textile waste, and production of biodegradable polymers are discussed. Process-related innovations are highlighted with examples like resource-saving techniques in manufacturing including supercritical CO₂ dyeing and digital textile printing, along with detailed study of recycling technologies. In addition, this book chapter also discusses the application of Life Cycle Assessment (LCA) as framework for evaluating sustainability and critically highlights major ongoing debates in the industry such as whether bio-based or recycled synthetic fibers are more sustainable. However, some knowledge gaps were also found in literature including lack of studies on integrated systems approach, limited understanding about social impacts of new technologies, and insufficient data available from developing countries perspective. For future direction, more emphasis should be given on interdisciplinary research to develop circular textile economy that is not only technologically feasible but also practically scalable and socially just.