Hand-woven carpet, as one of the most authentic traditional crafts of Iran, plays a significant role in employment generation, rural economic development, and the growth of non-oil exports. However, in recent years, this industry has encountered numerous challenges, leading to a decline in its production and supply. Among the affected regions, the Harris hand-woven carpet sector—despite its considerable economic, cultural, and social value—has suffered from reduced production and weakened market presence. This study adopts a descriptive-analytical approach to investigate the causes behind the stagnation of the hand-woven carpet industry in the rural areas of Harris County. The objective of the study is to identify the key factors contributing to this decline and to propose effective strategies for its revitalization. Data were collected using a Likert-scale-based questionnaire, focusing on the perspectives of local carpet weavers regarding the causes of the industry's recession. The data were analyzed using a one-sample t-test and Structural Equation Modeling (SMART PLS). The findings of the estimated model showed that several factors play a role in reducing the competitiveness of the regional hand-woven carpet industry. The most significant ones include the lack of appropriate design and patterning (44%), absence of incentive policies (30%), weak product aesthetics (26%), and low production quality (17%). These issues have resulted in declining customer demand, lower sales, and overall stagnation of the industry. The research emphasizes the necessity of developing supportive policies, adopting market-oriented designs, improving marketing strategies, enhancing product quality, strengthening workforce training, and increasing promotional efforts. Additionally, leveraging tourism potential and integrating the carpet industry with cultural tourism could play a vital role in the revival and sustainable development of Harris’s hand-woven carpet sector.