As I mentioned here, my grandmother could entertain children all day with a button, a handkerchief, and a piece of string. When I was little she taught me how to make a doll from a handkerchief.
eagerly volunteered were given baked goods as payment for being hand models for a tutorial on how to make the doll.
First, stand or sit opposite your friend. Each person take two corners of the hankie and roll them towards each other to meet in the middle as shown below.
When the two sides meet, rotate the hankie 90 degrees so that each person now holds two corners that are touching.
One person then folds his or her corners down about one third of the length of the hankie. These corners will be the feet of the doll.
The other person then folds his corners up leaving a little of the hankie showing above the corners. These corners become the hands.
The last corners that were folded up (the hands) then get crossed through the loop formed when the first corners were folded down. Each person then tugs a little on the corners in their hands to stretch the arms and legs.
Last, slip a ring or tie a string just above the arms to shape the head.
Now you have a finished doll.
If you want to use the hankie or make another doll just remove the ring or string and shake it loose.