Defect minimization remains a critical operational challenge in continuous polyester fiber manufacturing, where off-merge defects compromise fiber crystallinity and dye uniformity, leading to material downgrading. This study aims to optimize key heat-setting operational parameters—specifically heat-setter temperature and tow speed—to reduce off-merge defect rates in industrial polyester staple fiber production. Utilizing the Taguchi Design of Experiments (L4 orthogonal array) with three replications under commercial production conditions, process parameters were evaluated through Analysis of Variance (ANOVA) and Signal-to-Noise (S/N) ratio analysis under the “smaller-the-better” criterion. Results indicated that heat-setter temperature was the dominant factor influencing defect variability (39.02% contribution, F = 10.66), followed by tow speed (21.95% contribution, F = 6.00), whereas their interaction effect was statistically insignificant (9.76%). Optimal settings were identified at 200 °C temperature and 260 m/min tow speed. Confirmatory trials validated these parameters, reducing the off-merge defect rate from 11.50% to 8.25%, resulting in a net defect reduction of 3.25%. The findings demonstrate that higher thermal energy and optimized tension enhance molecular alignment and the consistency of dye uptake. Industrially, this study provides synthetic fiber manufacturers with an evidence-based, cost-effective optimization approach that significantly reduces scrap rates, improves yield efficiency, and supports sustainable quality engineering in large-scale production environments.