This study investigates the preparation of activated carbon fiber derived from waste cotton fabric for economical and ecofriendly recycling as well as its application to water purification. The activated carbon fiber was prepared by physical activation using steam and the adsorption property was then evaluated using methylene blue. When the activation temperature increased, the specific surface area and mesopore volume of the activated carbon fiber increased up to 2562 m2/ g and 0.214 cm3/ g, resulting in the increased adsorption of methylene blue. The results of the adsorption experiment for the activated carbon fiber were analyzed using the Langmuir and Freundlich equations. The Langmuir equation was more suitable than the Freundlich equation to explain the adsorption equilibrium. The maximum adsorption amount of methylene blue was 161.1–731.5 mg/g for fiber samples activated at temperatures ranging from 750 to 950 °C with sample labeled 750SA to 900SA according to the Langmuir equation. The kinetics of methylene blue adsorption by the activated carbon fiber were analyzed using non-linear pseudo-first-order and pseudo-second-order. Sample 750SA was suitable for the pseudo-first-order and 800SA, 850SA, and 900SA sample were suitable for the pseudo-second-order. Therefore, waste cotton fabric has the potential to be the precursor for activated carbon fiber with excellent adsorption properties.