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The textile industry, being a giant consumer of water and chemicals, uses synthetic dyes on a wide scale because of their low cost and wide color gamut. In contrast, synthetic dyes have shown great environmental hazards. A notable feature of textile dyes is their resistance to biodegradation, which contributes to long-lasting pollution in water, soil, and the atmosphere. The water body ecosystems are contaminated with dye-laden wastewater resulting from textile manufacturing. Photosynthetic activity is prevented, hence decreasing oxygen levels in water and drastically affecting aquatic life. Moreover, improper sludge disposal containing dyes leads to the degradation of soil quality, impacting plant health and microbial activities. Such pollutants can exhibit bioaccumulation in organisms, enhancing toxicity via the food chain and presenting serious health risks to humans, including carcinogenic effects and genetic malfunction. The paper reviews new developments related to ecologically friendly dyes, advanced wastewater treatments, and circular economies involving dye recycling and waterless dyeing techniques that are key to reducing the environmental impact of these dyes. Also needed is rigid enforcement of regulations coupled with the wider diffusion of sustainable technologies to minimize environmental damage in the textile industry and protect natural ecosystems and human health.