A well-known name in towelling (5)
I believe the answer is:
terry
'towelling' is the definition.
(terry is a kind of towelling)
'a well-known name in' is the wordplay.
'a well known' becomes 'err' (I am not sure about this - if you are sure you should give a lot more credence to this answer).
'name' becomes 'Ty'.
'in' is an insertion indicator.
'err' going within 'ty' is 'TERRY'.
Can you help me to learn more?
(Other definitions for terry that I've seen before include "Famous actress" , "(Rhyming) man's name" , "A man" , "Towelling material" , "Fabric with piles" .)