Microfibre pollution has emerged as a significant environmental challenge associated with the production, use, and disposal of textiles. This review synthesizes contemporary literature on circular economy innovations, policy responses, and implementation challenges to address microfibre emissions across the textile value chain. The study highlights key advancements in sustainable textile design, recycling and upcycling initiatives, and circular business models, all of which aim to reduce fiber shedding and extend product life. It also evaluates the role of national regulations, extended producer responsibility (EPR), eco-design strategies, and standards and certifications in governing microfibre release. Through comparative case studies and international policy analysis, the review highlights the uneven progress between high-income and low-income regions, underscoring the importance of public–private partnerships and community-driven interventions. Despite promising initiatives, the findings reveal persistent barriers related to technological limitations, weak enforcement, low public awareness, and infrastructural disparities. The paper concludes by identifying critical research gaps and calling for standardized shedding metrics, inclusive policy frameworks, consumer behavior change strategies, and scalable technological innovations. Addressing these gaps through integrated, equity-focused governance is essential for mitigating microfibre pollution and advancing a sustainable textile future.