The iterative design process of mechanical products has evolved towards a more sustainable direction driven by the concept of sustainable development. Modular design emphasizes the realization of user requirements under the condition of high efficiency and low cost, which is conducive to the diversification of product design. The sustainable innovative design methods are considered in modular design processes, which can improve the design capabilities of enterprises and enhance competitiveness. However, although the existing methods used in the iterative design of a product scheme contributes to satisfy the user requirements and generate the innovative scheme of the product, the sustainable design concepts such as the impact on the utilization of resources and environment during the iteration of the conceptual scheme and sustainability evaluation of product schemes have not been given sufficient attention. To resolve this, in this work, an iterative conceptual design process is proposed for modular products based on the sustainable analysis and creative template method. In this process, firstly, the KANO model is used to analyze the sustainable requirements of users. Secondly, a function behavior structure (FBS) model and creative template method are used to form sustainable innovative modular products conceptual design scheme. Finally, fuzzy analytic hierarchy process (FAHP) is used to evaluate the product scheme. The iterative conceptual design process proposed in this paper can be abbreviated as S-KFCF. The prototype conceptual scheme design of a novel low-temperature plasma deposition device is conducted. The results suggest that the proposed process could effectively reduce the total cost, shorten design cycles, increase product part recovery rates, and improve the environmental friendliness of the design schemes produced via sustainable analysis.