The current study evaluates the environmental sustainability of the hand-woven carpet industry in Fars province using Life Cycle Assessment (LCA) with a cradle-to-grave approach, modeled in SimaPro software. Results show that the production phase accounts for 60% of total environmental impacts, making it the primary hotspot. Although the product emits only 888 kg CO2-eq per square meter—showing a significant carbon advantage over machine-made alternatives—reliance on traditional dyeing methods and lack of wastewater management have increased human toxicity to 2.2 kg 1,4-DCB eq. Additionally, water consumption reaches 100 liters per square meter, and with 60% of waste landfilled, resource efficiency is low, reflecting a linear economic model. To achieve sustainability, a shift from traditional, nature-dependent production toward eco-friendly, engineered management is essential. This can be accomplished by replacing conventional dyes with eco-friendly alternatives, establishing wastewater treatment systems, and implementing Extended Producer Responsibility (EPR) policies for better waste management. These measures can help reduce environmental impacts, promote resource efficiency, and support a more sustainable industry in Fars province.