This is a great pattern to use up all that extra feltable yarn that I know you've got hanging around in your stash!
24" size 8 -10 circular needles
size 8-10 DPNs
To start: Divide your yarn into two groups, A and B. You can divide by color, value (light/darkness), warm and cool. The darker bag was divided into a green/blue group and a purple/grey group. The lighter bag was divided into a warm (reds/yellows/oranges) and a cool (blues/greens). Have fun, go wild! And, when in doubt, add more colors! (Though I think this bag would look great in just black and white.)If you are using a fingering weight yarn, make sure to knit everything double stranded!
Body: Pick any yarn from group A, and cast on 132 stitches. Place marker and join, being careful not to twist stitches. Knit two rounds, then add a yarn from group B and begin working chart. You will work through the chart 4 times, changing yarn as you feel like it. (I found that giving each color about 7-10 rows felt good for me. I also made sure that I didn't change both A and B yarns in the same row.)
After working the chart 4 times, drop the group B yarn, and knit 4 rounds in K2 P2 rib.
Handle: On the next round, knit 4, bind off 58, place 8 stitches on a holder, bind off 58, knit 4. Move stitches to DPNs and work an 8 stitch I-cord for about 16 inches. Work the final row back as a purl row, then attach the handle to the 8 stitches on the holder using a kitchener stitch.
Turn bag inside out and seam the bottom with mattress stitch. Sew in all ends.
I felted the bag by throwing it into the washer with a few towels and running it on the "warm/cold" setting. I've got a front loading machine, and just let it go through the whole cycle.
Stuff bag with plastic bags to shape it while it dries.