With the booming development of the Internet and AI (Artificial Intelligence), smart clothing has emerged to meet consumers’ personalized needs in healthcare, work, entertainment, etc., and has rapidly become a hotspot in the clothing industry and research field. However, as smart clothing gets popular, sustainability issues are becoming increasingly prominent during its development and circulation. To explore the status quo of the sustainable development of smart clothing, from the perspective of the industry chain, this paper discusses its challenges during raw material supply, design, manufacturing, storage, logistics and recycling. Based on these challenges and the characteristics of smart clothing and the future trend of the apparel industry, some countermeasures are put forward from three aspects: design, raw material and supply chain management. This review aims to arouse the reflection of practitioners and provide feasible suggestions for the healthy and lasting development of the apparel industry, also hoping to offer references for other industries.