The jute manufacturing sector of Bangladesh has recently started to revitalise with the rise in globaldemand for jute goods, thanks to the environment-friendly nature of jute, and the price hike of petroleum products, an essential raw material for its substitute, polypropylene. Nevertheless the industry has struggled with its low level of competitiveness against its substitute products in terms of cost, ability to handle bulk volume of products and diversity of product. For long-term sustainability of the industry,improvement of productivity and manufacturing of better quality and diversified products are being regarded as the most important issues. The present study titled Technological Upgradation in the Jute Mills: Challenges and Way Out has been carried out with this broad objective. More specifically the study has examined the market potentials of jute goods at local and international levels; investigated the current status of jute mills in terms of machines, workers, working environment and production process; analysed the productivity and efficiency of jute mills; and estimated the possible gains through improvement of efficiency in the jute mills. Based on the findings, the study put forward necessary suggestions to modernise the machineries, improve the production process, and develop human resources in the jute manufacturing sector. The study is based on the data collected from 10 sample jute mills of both spinning and composite categories which are under the authority or membership of Bangladesh Jute Mills Corporation (BJMC), Bangladesh Jute Mills Association (BJMA) and Bangladesh Jute Spinners Association (BJSA). Since it is a sample survey-based study, the findings are likely to be considered as indicative with regard to the objectives of the study.