The innovative integration of phase change materials (PCMs) into textiles through microencapsulation presents a transformative approach to developing thermally regulated fabrics. This study explores the synthesis and characterization of microcapsules containing a coconut oil core and an ethylcellulose shell, and their application on cotton fabrics coated with polyvinyl alcohol (PVA) nanofibers. The dual-layer system involving microcapsules and nanofibers is designed to enhance the thermal insulation properties of textiles by regulating heat through the absorption and release of thermal energy. The microencapsulation of PCMs allows for the effective incorporation of these materials into textiles without altering the fabric’s inherent properties. In this study, the coconut oil serves as the PCM, known for its suitable phase change temperature range, while ethylcellulose provides a robust shell, enhancing the microcapsules’ structural integrity. The application of a PVA nanofibers layer not only strengthens the thermal regulation properties but also protects the microcapsules from release while the fabric is manipulated, thereby prolonging the functional life of the fabric. Comprehensive testing, including scanning electron microscopy (SEM) and Fourier transform infrared spectroscopy (FTIR), confirms the successful application and durability of the microcapsules on the textiles. Thermal imaging studies demonstrate the fabric’s enhanced capability to maintain a consistent temperature, highlighting the potential of this technology in applications ranging from smart clothing to energy-efficient building materials or automotive isolation. The integration of PCMs in textiles via microencapsulation and nanofiber technology marks a significant advancement in textile engineering, offering new opportunities for the development of smart and sustainable materials. The study demonstrates the promising potential of integrating PCMs into textiles using microencapsulation and nanofiber technologies. Despite the initially modest insulation improvements, the methodology provides a robust foundation for further research and development.