Economic development generally refers to the quantitative and qualitative changes in the economy to promote the standard of living and economic health of a specific area. This article focuses on the role of cottage industry in economic development. We have identified various factors of economic development on which the cottage industry is contributing a lot. To explain it we have collected primary data through structured questionnaire. This paper also discusses the problems associated with cottage industry. Five sectors of cottage industry have been included into this study. This paper focuses on the contribution of each sector to the economic development of Bangladesh. Finally, some recommendations are put forth for the development of cottage industry so that this industry can thrive and contribute more to the economic development of Bangladesh.