The objective of this research paper is to investigate the important factors that contribute to the absorbency characteristics of terry fabric in order to produce highly absorbent terry towels by using suitable raw materials and changing the fabric constructional parameters. Yarns produced from two varieties of cotton (100% J-34 and MCU-5) and their blends with bamboo and poly vinyl alcohol (PVA) with different counts, twist and number of plies are used to prepare terry fabric of varying loop densities, loop lengths and loop shape factors. The water absorption rate and the total amount of water absorbed are measured by a gravimetric absorbency testing system (GATS). It is found that loop density is the most important parameter for water absorption rate followed by loop length and yarn twist. For the total amount of water absorbed, loop density is again the most important parameter followed by yarn twist, loop shape factor and number of ply in the pile yarn. Furthermore, a Box-Behnken statistical design with 3 factors and 3 levels is used to determine the optimum construction parameters to obtain the desired absorbency characteristics of terry towels and also to see the interaction effect of the various factors.