In recent years, textiles with antimicrobial properties have attracted more and more attention. As natural antimicrobial agents, essential oils’ potential application value lies in their ability to provide textiles with antimicrobial functions. In this paper, organic solvent extraction (n-hexane, petroleum ether, ethanol) and steam distillation were used to extract saffron petal essential oil (SPEO). It was found that organic solvent extraction (ethanol) had the highest extraction rate and the most apparent bacteriostatic effect. SPEO-Ms were prepared using the composite condensation method with gelatin and chitosan. The microstructure, encapsulation efficiency, slow-release performance, infrared spectrum, and thermal stability of the SPEO-Ms were evaluated. The results showed that the microencapsulated essential oil had good bacteriostatic properties. Antimicrobial cotton fabric was prepared by impregnating microcapsules onto cotton fibers. The effects of the microcapsules’ concentration on the whiteness, air permeability, moisture permeability, and bacteriological inhibition of the fabric were investigated. The results revealed that SPEO-Ms have the potential to be used as a new antimicrobial agent in textiles.