Abstract: This study is based on the theoretical framework of “factor flow–industrial interaction–space linkage” of the cotton industry cooperative agglomeration. Considering China’s cotton origins from 2003 to 2022 as the research object, it empirically researches the impact of the cotton industry cooperative agglomeration on cotton green total factor productivity and its functional mechanism. The study found that: 1) Cotton industry synergistic agglomeration and cotton green total factor productivity exhibit an “inverted U-shaped” relationship that first promotes and then inhibits; 2) The synergistic agglomeration of the cotton industry has a “self-reinforcing” cumulative cyclical effect, which can last for four years; 3) The inflection point is located at the 94.12% quantile of the sample, indicating that the vast majority of China’s cotton producing regions are currently in the promotion stage; 4) The impact of synergistic agglomeration in the cotton industry on green total factor productivity in cotton is significantly heterogeneous in terms of natural resources and factor demand elasticities; 5) Cotton industry synergistic agglomeration acts on cotton green total factor productivity through three mechanisms: competition, knowledge spillover and scale effects. The competition and knowledge spillover effects can alleviate the “inverted U-shaped” relationship, whereas the scale effect strengthens the “inverted U-shaped” relationship. Knowledge spillover and scale effects can push the inflection point to the right and widen the facilitation phase interval, whereas excessive competition can push the inflection point to the left, leading to an earlier inhibition phase. Finally, suggestions are made to optimize the layout of the cotton industry, avoid excessive competition, develop moderate-scale operations to achieve high-quality development of the cotton industry, and modernize Chinese-style agriculture.