Abstract The objective of this study is to develop eco-friendly, functional towel material utilizing cotton-Modal-chitosan blended(C-M-CH) yarn and natural dyeing with mugwort colorants. Dyeing properties of towels with mugwort colorants were studied by investigating the effect of dyeing conditions including concentration of mugwort colorants, dyeing temperature, and dyeing time, and the effects of mordants on dye uptakes were investigated. The C-M-CH towel showed better dye uptake than 100% cotton towel with mugwort colorants. The shade of towels got darker and red-yellowish tint increased by mordanting. Comparing with 100% cotton towel, the colorfastness of dyed C-M-CH towel was satisfactory showing above 3 grade which is the lowest grade to washing fastness. The antibacterial activity against Staphylococcus aureus and deodorization performance of towels were excellent and improved by dyeing with mugwort colorants. From the results obtained, it is concluded that the cotton-Modal-chitosan blended towel dyed with mugwort colorants can be used practically for an eco-friendly and multi-functional towel materials with excellent absorbance and drying properties.