Hand-knotted Persian rugs are made by hand, with each tuft knotted into the carpet's weaved threads. Hand-tufted Persian rugs involve the use of a "tufting gun" that pushes loops of thread through a backing. Hand-tufted rugs do not involve hand-knotting for each tuft of carpet, while hand-knotted rugs do.
A hand-knotted rug has a natural fringe around the edges of the rug, indicating where the "warp" threads (meaning threads that are run across the woven base of the rug) have run out the ends of the rug and are tied together. Hand-tufted rugs have a fringe glued to the edge of the rug at the back, not naturally weaved into the rug.
Because hand-knotted rugs are usually made by hand without a set backing pattern, they have varying and highly individual patterns. Hand-tufted rugs are created on a prepared backing and so have a limited number of patterns. Because of the individuality of hand-knotted rugs, they are also generally more expensive.
Because hand-knotted rugs have each tuft knotted into a woven backing, they tend to be far more durable than the hand-tufted rugs, which generally use glue to bind together the different elements of the rug. In addition, hand-tufted rugs are generally made with cheaper materials, which can result in an even greater likelihood of wear and tear.