This study explores the integration of sustainable practices in the textile industry through the use of naturally colored cotton, which offers significant environmental advantages by eliminating the need for chemical bleaching and dyeing, thereby conserving water, chemicals, and energy. We examined the impact of yarn count and twist multiplier (TM) on the quality parameters of knitted fabrics tailored for winter cotton sweaters, utilizing a flatbed knitting machine to create a rib-cum-interlock structure. Our analysis aimed at optimizing thermal resistance, pilling resistance, and bursting strength, while reducing air permeability and fabric shrinkage. The findings indicated that thermal resistance peaked at 2.33 × 10−3 m2K/W for yarns with a 20/2 Ne count and a 4.5 TM. Furthermore, coarser yarns demonstrated enhanced bursting strength, with the highest at 276.8 kPa for a 16/2 Ne count and 4.25 TM, and an increase in yarn count improved pilling resistance. Air permeability was lowest at 103 mm/s for 16/2 Ne yarns. Interestingly, a rise in yarn count led to negative lengthwise shrinkage but positive widthwise shrinkage. The 20/2 Ne yarn count with a 4.50 twist multiplier emerged as optimal across considered properties, underscoring the potential of naturally colored cotton as a sustainable alternative in textile manufacturing. These findings provide valuable insights into the potential of naturally colored sustainable cotton as a viable alternative to conventional cotton in the textile industry.