The growing environmental impact of textile waste, fueled by the rapid rise in global fiber production, underscores the urgent need for sustainable end-of-life solutions. This review explores cutting-edge pathways for textile waste management, spotlighting innovations that reduce reliance on incineration and landfilling while driving material circularity. It highlights advancements in collection, sorting, and pretreatment technologies, as well as both established and emerging recycling methods. Smart collection systems utilizing tags and sensors show great promise in streamlining logistics by automating pick-up routes and transactions. For sorting, automated technologies like near-infrared and hyperspectral imaging lead the way in accurate and scalable fiber separation. Automated disassembly techniques are effective at removing problematic elements, though other pretreatments, such as color and finish removal, still need to be customized for specific waste streams. Mechanical fiber recycling is ideal for textiles with strong mechanical properties but has limitations, particularly with blended fabrics, and cannot be repeated endlessly. Polymer recycling—through melting or dissolving waste polymers—produces higher-quality recycled materials but comes with high energy and solvent demands. Chemical recycling, especially solvolysis and pyrolysis, excels at breaking down synthetic polymers like polyester, with the potential to yield virgin-quality monomers. Meanwhile, biological methods, though still in their infancy, show promise for recycling natural fibers like cotton and wool. When other methods are not viable, gasification can be used to convert waste into synthesis gas. The review concludes that the future of sustainable textile recycling hinges on integrating automated sorting systems and advancing solvent-based and chemical recycling technologies. These innovations, supported by eco-design principles, progressive policies, and industry collaboration, are essential to building a resilient, circular textile economy.