Textile manufacturers are now exploring sustainable finishing strategies that also provide the functionality to textiles. Functionalization, a processing step in the textile industry, is regarded as one of the most important processes in improving the quality of textile products. To improve the functional and aesthetic features of textiles, several chemical finishes such as softening, stiffening, water and oil repellent, wrinkle recovery finish, hydrophobic finishes, flame retardant, antimicrobial, and UV-protective are used. To summarize, the textile finishing practice is characterized by a high water, energy, and chemical consumption, all of which have a huge negative impact on the health of living beings by exacerbating devastating environmental impacts such as climatic change, global warming, ozone depletion, water pollution, and carbon footprint, rendering the textile finishing unsustainable. To develop functional textiles, different functionalization procedures, such as coating or direct incorporation of nanoparticles, spraying, sputtering and some other chemical treatment methods are being used. Considering the three pillars of sustainability, currently available functional textiles are not sustainable at any step of their life cycle, from manufacturing through utilization and disposal. To lessen the probability of environmental challenges and impacts on human health, it is imperative to analyze the performance of the textile sector while addressing the three elements of sustainability. The current study is linked with the importance of bioactive textiles, particularly use in hospital areas where healthcare workers utilize them. In the initial study, a reactive bioactive compound was synthesized using Triclosan (an antimicrobial agent) and cyanuric chloride (reactive group). Subsequently, a reactive dye was modified by gradually adding the previously synthesized bioactive compound. The successful synthesis of all products was verified through 1H-NMR, FTIR, and UV-Vis characterization. These synthesized products were applied to cotton fabric using exhaust dyeing methods in studies 2–4 and pad-dry-cure finishing methods in studies 1 and 5. The antibacterial properties against Escherichia coli, and Staphylococcus aureus antiviral properties against Coronavirus, and antifungal properties against Aspergillus niger of the treated fabrics were assessed using standard testing methods before and after washing cycles. Additionally, colorfastness properties, fastness properties (rubbing, light, and washing), and ultraviolet protection factor (UPF) of the treated fabrics were examined. The treated fabrics demonstrated significant antibacterial (> 90%), antiviral (> 85%), and antifungal (> 80%) activities against all test microbes. These results indicated the successful incorporation of the bioactive agent into the dyes/finish structure through covalent bonds, preventing leaching into the environment during washing. This research introduced an environmentally friendly dyeing and finishing method for developing highly durable bioactive textiles.