Reposted with thanks to:
Make your own cloth napkins « Skip To My Lou
Here are two versions, one with mitered corners and the other with square corners. First pre-wash the fabric. Cut fabric into a square 1" larger than the desired finished size. I cut 17 inch squares so that I would have 16 inch napkins.
Mitered Corner Napkin Instructions-
Iron edge over 1/4 inch.
Moving clockwise, iron next edge 1/4 inch over. Iron all four sides then fold first side over again another 1/4 inch. Do all four sides moving clockwise.
Fold the side edge to the middle on each side (folding on press lines - fold side down then fold again to make corner). Repeat until all four sides have mitered corners.
Finished with a mitered corner napkin!
Square Corner Napkin Instructions-
To make a napkin with square corners, iron edge over 1/4 inch. Moving in clockwise direction iron next side 1/4 inch until all four sides have been pressed 1/4 inch.
When all four sides have been folded over twice, sew all the way around the edge of the napkin. I think most people sew straight off the edge on each side, but my sewing machine doesn't like sewing through those layers.