Digital technologies have opened up new pathways for the living transmission of intangible cultural heritage (ICH). However, digitalization practices for local traditional crafts generally place greater emphasis on storage and preservation than on transmission and inheritance, and sustainable operational mechanisms have yet to be established. To address the developmental challenges of digital transmission in traditional crafts, this study takes Rizhao embroidery as a case study and employs a case study approach to examine the structural constraints on its digital living transmission from three dimensions: knowledge, participation, and value, drawing on multiple sources of data. The findings reveal a closed-loop constraint in the digital transmission of Rizhao embroidery, characterized by discontinuities in knowledge transformation, the absence of sustained learning mechanisms, and insufficient value feedback and circulation. These three constraints are interrelated and mutually reinforce one another, thereby limiting the long-term transmission of ICH. Building on the essential principles of living ICH transmission, this study develops a three-dimensional operational mechanism and a five-stage transmission model comprising “recording, dissemination, learning, co-creation, and feedback,” thereby clarifying the systemic operational logic of digital living transmission. By moving beyond the conventional perspective of technology-enabled transmission, this study contributes to the theoretical framework for the digital transmission of local traditional crafts and provides a feasible reference model for the digital, living, and sustained transmission of local ICH.