Abstract: This study is based on the theoretical framework of “factor flow-industrial interaction-space linkage” of the cotton industry cooperative agglomeration. With China’s cotton origins as the research object, the study empirically investigaed the impact of the cotton industry synergistic agglomeration on cotton green total factor productivity and its functional mechanism from 2003 to 2022. The study found that: 1) Cotton industry synergistic agglomeration and cotton green total factor productivity exhibited an “inverted U-shaped” relationship that first promoted and then inhibited. 2) The synergistic agglomeration of the cotton industry had a “self-reinforcing” cumulative cyclical effect, which lasted for four years. 3) The inflection point was located at the 94.12% quantile of the samples, indicating that the vast majority of China’s cotton producing regions were currently in the promotion stage. 4) The impact of synergistic agglomeration in the cotton industry on green total factor productivity in cotton was significantly heterogeneous in terms of natural resources and factor demand elasticities. 5) Cotton industry synergistic agglomeration acted on cotton green total factor productivity through three mechanisms: competition, knowledge spillover and scale effects. The competition and knowledge spillover effects alleviated the “inverted U-shaped” relationship, whereas the scale effect strengthened the “inverted U-shaped” relationship. Knowledge spillover and scale effects pushed the inflection point to the right and widen the facilitation phase interval, whereas excessive competition pushed the inflection point to the left, leading to an earlier inhibition phase. Finally, suggestions were made, such as optimizing the layout of the cotton industry, avoiding excessive competition, developing moderate-scale operations to achieve high-quality development of the cotton industry, and modernizing Chinese-style agriculture.