The production and consumption of textile products continue to grow, together with their impact on the environment, due to a lack of reuse, repair and recycling of materials. Polyethylene terephthalate (PET), or polyester, is the most widely produced textile fibre globally, yet less than 1% of the fibre market currently originates from pre- and post-consumer recycled textiles. Thermo-mechanical recycling presents a promising approach to PET textile recycling by melting thermoplastic materials and reprocessing them into regranulate for fibre production. Conventional thermo-mechanical recycling comprising shredding, compacting and compounding, has not been effective in recovering high-quality PET fibres due to material impurities and a decline in intrinsic viscosity (IV). The incorporation of only 10% recycled PET into virgin has shown to reduce tenacity by 50%. While the use of chain extenders has improved IV, it also introduced challenges such as inhomogeneity, polydispersity and gel formation. Encouraging results have been observed with post-industrial, pure PET textile waste using Erema’s advanced recycling line, which integrates in-line polycondensation and fine filtering. This suggests that carefully sorted post-consumer PET textile waste holds significant potential for successful fibre-to fibre recycling. The presented study explores the latest advancements in PET textile recycling, highlighting the technical barriers and emerging solutions to improve the quality and circularity of polyester fibres.