Entrepreneurship has emerged in recent decades as one of the most important strategies for economic development, playing a significant role in job creation, productivity enhancement, and economic growth. Within this context, the entrepreneurial ecosystem approach—emphasizing interactions among economic, social, and institutional actors—provides an appropriate framework for analyzing the formation and development of entrepreneurial activities. Handicrafts, particularly in rural areas, can serve as an effective platform for fostering entrepreneurship, generating employment opportunities, and preserving cultural heritage. Varzaghan County in East Azerbaijan Province, with its long-standing tradition in handwoven carpet production, possesses considerable potential for developing entrepreneurial activities in the handicrafts sector. The main objective of this study is to analyze the status of the handicraft's entrepreneurial ecosystem, with a particular focus on handwoven carpets in Varzaghan County. The research adopts a descriptive–analytical approach with an applied objective. Data were collected through documentary studies and field investigations, and Porter’s Value Chain model was employed to analyze value-creating activities in the carpet industry. The findings indicate that handwoven carpet production in Varzaghan enjoys a comparative advantage and significant social profitability. However, the industry’s value chain faces several challenges, including the high share of labor and raw material costs, weaknesses in marketing and sales, limited diversity in design and patterns, restricted access to high-quality raw materials, and the presence of multiple intermediaries. Policy analysis indicators further reveal insufficient institutional support and unstable market conditions for producers. Despite these challenges, traditional weaving skills, high-quality raw materials, and the region’s historical carpet-weaving heritage constitute major development capacities. Accordingly, strengthening weavers’ training and empowerment, establishing quality control centers for raw materials, promoting design innovation, and expanding digital marketing and export channels are proposed as key strategies for enhancing the entrepreneurial ecosystem of handwoven carpets in Varzaghan County.