As sustainable development becomes a global consensus, the concept of circular design has been widely applied and researched in various fields, especially in the innovation and inheritance of traditional crafts. The circular design concept offers a new perspective and method. This article, guided by the concept of circular design, discusses how to apply this concept to traditional tie-dye craftsmanship with the goal of achieving sustainable development and innovation in tie-dye techniques. Through an in-depth analysis of the traditional craft process, material use, and cultural significance of tie-dye, a series of innovative paths are proposed, exploring new design directions and market potential for tie-dye products. Introducing the concept of circular design into the exploration and practice of tie-dye craftsmanship not only helps to address current environmental and market challenges but also provides new ideas and methods for protecting and inheriting this traditional craft and promoting its development towards more sustainable and innovative directions.