As technology evolves and consumer needs diversify, textiles have become crucial to determining the future of fashion, sustainability, and functionality. Functional textiles, which not only provide comfort and aesthetics as traditional textiles but also endow textiles with special functions such as antibacterial, anti-odor, moisture absorption and perspiration, anti-ultraviolet (UV), flame-retardant, self-cleaning, and anti-static properties through technological innovation and upgrading, have attracted increasing attention because they satisfy the specific needs of people in different environments and occasions. However, functionality often occurs at the expense of comfort in existing functional products. Endowing textiles with excellent multi-functionality with marginal effects on comfort and wearability properties continues to be a challenge. Atomic layer deposition (ALD) paves the way for creating functional fabrics by enabling the formation of highly conforming inorganic/organic coatings over a large area with precise atomic-level film thickness control from a self-limiting reaction mechanism. Therefore, this paper introduces the reaction mechanism of ALD and the unique advantages of depositing inorganic nanofilms on fiber and textile surfaces. The factors influencing ALD and the commonly used ALD-derived technologies are then discussed. Subsequently, the research progress and breakthroughs in inorganic nanofilms prepared by ALD in conferring multifunctional properties on textile surfaces, such as antimicrobial, UV-resistant, heat-insulating, multifunctional wetting, structural coloring, thermoelectric elements, and flexible sensing, are reviewed. Finally, future developments and possible challenges of ALD for the large-scale production of multifunctional fabrics are proposed, which are expected to promote the development of next-generation advanced functional textiles.