Smart cotton fabric with simultaneous temperature and pH responsive moisture management and antibacterial properties was prepared by applying poly-(N-isopropylacrylamide)/chitosan microgel in combination with bio-barrier-forming sol–gel precursor dimethyloctadecyl (3-(trimethoxysilyl)propyl) ammonium chloride. Two application processes were used: one-step, which included deposition of a mixture of PNCS microgel and Si-QAC mixture (PNCS/SiQ (1S)), and two-step, comprising deposition of PNCS microgel followed by Si-QAC (PNCS + SiQ (2S)) and vice versa, i.e., deposition of Si-QAC followed by the PNCS microgel (SiQ + PNCS (2S)). Different analysis, i.e., nuclear magnetic resonance, thermogravimetry and dynamic light scattering were used to characterize the poly-(N-isopropylacrylamide)/chitosan microgel, while scanning electron microscopy, Fourier transform infrared, and X-ray photoelectron spectroscopy analysis were employed to determine the morphological and chemical properties of the modified cotton samples. Their functional properties were assessed by the moisture content, water vapor transmission rate, water retention capacity and antibacterial activity against Escherichia coli. While Si-QAC granted excellent antibacterial activity, it also influenced swelling/deswelling activity of the poly-(N-isopropylacrylamide)/chitosan microgel. Accordingly, it slightly impaired moisture content and water retention capacity at conditions when microgels swell but increased water repulsion from the poly-(N-isopropylacrylamide)/chitosan microgel at conditions that trigger its coil-to-globe transition. The application process greatly influenced the washing fastness of the coatings, and the PNCS + SiQ (2S) application process appeared most promising. In this case, the poly-(N-isopropylacrylamide)/chitosan microgel acted as a carrier for the sol–gel precursor dimethyloctadecyl (3-(trimethoxysilyl)propyl) ammonium chloride, causing its gradual release to the fiber surface triggered by a variation of temperature and pH and thus preserving its excellent antibacterial activity after five laboratory washings. To assure complete synergistic activity of both components in the coating, further optimization of the sol–gel precursor dimethyloctadecyl (3-(trimethoxysilyl)propyl) ammonium chloride concentration is necessary.