This chapter examines the historical evolution, current dynamics, and sustainability trajectory of the Prato textile district, one of Europe’s most important and long-standing industrial districts. It traces the district’s origins, its transformation through phases of growth, decline, and reorganization, and its resilience in facing external pressures. Central to Prato’s development has been its distinctive system of small and medium-sized enterprises, embedded in a strong local culture of cooperation, innovation, and knowledge sharing, which has fostered innovations. The chapter also highlights the role of knowledge creation processes, institutional actors, and external linkages in shaping the district’s adaptability and competitiveness. In response to increasing global sustainability pressures, Prato has leveraged its historic expertise in recycling and circular practices, positioning itself as a model for sustainable textile production.