Textile waste is becoming among the most polluting waste in the world, discarded mostly in landfills. Valorizing textile waste via anaerobic digestion (AD) helps conserve resources, reduce environmental impact, and foster a circular economy. Although several reviews have discussed textile waste AD, there is a lack of detailed understanding of the challenges encountered during textile waste AD. Therefore, the goal of this review is to focus on challenges encountered and possible solutions for those challenges for biogas and fertilizer conversion via AD. Potential strategies include chemical, biological, and thermal pretreatments that significantly increase the digestion process. Co‐digestion of natural textile waste, cotton, and wool with carbon and nitrogen‐rich substrates improves AD efficiency by twofold. Moreover, separating polyester from polycotton and textile dye removal via solvent and advanced oxidation processes significantly increases methane yield compared with untreated textile waste. This review can aid in analyzing suitable methods to optimize the biogas production of textile waste via AD.