One variation of a method for producing a smart yarn includes: aligning a set of sensing elements offset along a lateral axis in a magazine, wherein each sensing element in the set of sensing elements includes a sensor, a first conductive lead extending from a first side of the sensor along a longitudinal axis perpendicular to the lateral axis, and a second conductive lead extending from a second side of the sensor opposite the first side and along the longitudinal axis； wrapping a set of fibers into a yarn within a wrapping field； feeding a leading end of a first sensing element, in the set of sensing elements, from the magazine into the wrapping field； releasing the first sensing element from the magazine into the wrapping field； encasing the first sensing element between the set of fibers within the yarn； and repeating this process for the set of sensing elements.
