Cracking remains a primary durability challenge in concrete infrastructure, particularly in water-retaining and marine environments. This study evaluates recycled textile-derived cellulose as a sustainable self-healing agent for cementitious composites. Specimens with 0–5% cellulose replacement underwent controlled surface cracking and internal mechanical damage, with healing quantified over 28 days via optical microscopy, micro-CT, mechanical testing, and microstructural characterization. Results demonstrated that 2% cellulose incorporation was the optimum dosage, enhancing both surface and internal healing. Surface crack closure was 10.46% for narrow cracks and 4.87% for the control, while internal healing efficiency achieved 22.1% compared to 11.8% for plain mortar. Micro-CT revealed a 61.2% reduction in elongated crack-like voids, and compressive strength recovery peaked at 123.5%. SEM/EDS identified C-S-H, calcium carbonate, and calcium hydroxide precipitation, driven by cellulose-mediated internal curing and fiber bridging. The hydrophilic cellulose network sustains crack repair through internal moisture retention, without external healing agents.