Free Knitting Pattern: The Margalo Gift Bag
There is something quietly wonderful about a handmade gift bag. Unlike wrapping paper that gets torn away and tossed in the recycling bin, a knitted bag becomes part of the gift itself — something the recipient keeps, uses, and treasures. The Margalo Gift Bag is one of those patterns that manages to feel both elegant and approachable, striking the kind of balance that makes it perfect for knitters of all experience levels. Whether you are making it to hold a birthday present, a holiday treat, or a small token of appreciation, this pattern delivers a finished object that looks far more complicated than it actually is.
In this post, you will find the complete free knitting pattern for the Margalo Gift Bag, along with notes on yarn selection, sizing options, finishing tips, and ideas for customization. Pour yourself a cup of tea, pull out your needles, and let’s get started.
A Little Background on the Margalo Gift Bag
The name Margalo is borrowed from the small, brave bird in E.B. White’s beloved story Stuart Little — a creature known for her beauty and the way she inspired those around her. It felt like the right name for a bag that is meant to carry joy from one person to another. The design itself draws on classic knitting traditions: a simple textured stitch that creates a woven-looking fabric, an i-cord drawstring that closes the top with a satisfying cinch, and an optional embellishment that lets you make each bag feel distinctly personal.
This pattern has been written to produce a bag that is approximately 7 inches wide and 9 inches tall when blocked, which is a generous size — roomy enough to hold a candle, a small book, a selection of chocolates, a bottle of perfume, or a collection of smaller treats. Notes for making a smaller version (ideal for jewelry or a gift card) are included at the end.
Materials
To knit the Margalo Gift Bag as written, you will need the following:
Yarn: Approximately 120 yards of a smooth DK or light worsted weight yarn. The pattern works beautifully in a single color, but it is equally lovely in two colors if you want to create a stripe effect or contrast drawstring. Natural fibers like merino wool, cotton, or a cotton-wool blend are ideal because they block well and give the finished bag a polished appearance. If you are making this as a gift for someone with wool sensitivity, a plant-based fiber like Paintbox Simply DK (cotton-acrylic blend) or Lion Brand 24/7 Cotton works wonderfully.
Needles: US size 5 (3.75mm) double-pointed needles or a short circular needle for magic loop. If you prefer working flat and seaming, the pattern can be adapted, and notes for that method are included below.
Notions: A tapestry needle for weaving in ends, a stitch marker, and scissors. If you plan to make the i-cord drawstring (which is highly recommended), you will need two double-pointed needles in the same size.
Gauge: 22 stitches and 30 rows over 4 inches in stockinette stitch. Gauge is not absolutely critical for this project since a gift bag does not need to fit anyone precisely, but if your gauge is significantly looser or tighter, your finished dimensions will vary accordingly.
Stitch Guide
Before beginning, familiarize yourself with the following stitches used in this pattern.
Seed Stitch (worked in the round over an even number of stitches):
Round 1: K1, P1, repeat to end.
Round 2: P1, K1, repeat to end.
Repeat these two rounds for pattern.
Seed Stitch (worked flat):
Every row: K1, P1, repeat to end, ending K1 if working over an odd number of stitches.
I-cord:
Using two double-pointed needles, cast on 3 stitches. Knit across. Without turning your work, slide the stitches back to the right end of the needle. Pull the working yarn snugly across the back and knit again. Repeat until the cord is the desired length. This creates a firm, round tube of knitting that makes a beautiful drawstring.
K2tog: Knit two stitches together (a right-leaning decrease).
SSK: Slip one stitch knitwise, slip the next stitch knitwise, insert the left needle into the fronts of both slipped stitches and knit them together (a left-leaning decrease).
YO: Yarn over. Bring the working yarn forward between the needles, then take it over the right needle to create a new stitch.
Pattern Instructions
Cast On and Bottom of the Bag
Using your preferred cast-on method, cast on 72 stitches and join to work in the round, being careful not to twist. Place a stitch marker to indicate the beginning of the round.
Rounds 1 – 6: Work in seed stitch as established.
These six rounds form a firm, textured base that helps the bag stand up when set on a surface and keeps the bottom edge from curling.
Round 7 (Increase Round): Knit all stitches.
You will now begin the body of the bag in a simple woven-look texture stitch.
Body of the Bag
The body stitch pattern is a four-row repeat that creates a subtle, woven-looking texture. It is deeply satisfying to knit because the rhythm is easy to memorize after the first full repeat.
Round 1: K3, P1, repeat to end.
Round 2: Knit all stitches.
Round 3: K1, P1, K2, repeat to end.
Round 4: Knit all stitches.
Repeat these four rounds until the body of the bag measures approximately 7.5 inches from the cast-on edge, ending after Round 4 of the pattern.
If you are working in two colors, you can switch colors every two rounds or every full four-round repeat for a stripe effect. The pattern stitch shows up particularly beautifully when the knit and purl rows are in contrasting colors.
Transition to the Eyelet Band
The eyelet band creates the channel through which the drawstring will run. It is worked over six rounds.
Round 1: Knit all stitches.
Round 2: Purl all stitches.
Round 3 (Eyelet Round): K2, YO, K2tog, repeat to end.
Round 4: Knit all stitches.
Round 5: Purl all stitches.
Round 6: Knit all stitches.
The two purl rounds on either side of the eyelets create a gentle ridge that frames the drawstring channel, giving the top of the bag a clean, deliberate look.
Top Edge
Rounds 1 – 6: Work in seed stitch as established.
Bind off loosely in seed stitch on Round 7. A stretchy bind-off is ideal here — the Jeny’s Surprisingly Stretchy Bind-Off works wonderfully and keeps the top edge from pulling in.
I-Cord Drawstring
Cast on 3 stitches onto a double-pointed needle. Work i-cord for approximately 36 inches, or until the cord is long enough to thread through all the eyelets and still have several inches of tail on each end for tying.
Bind off the 3 stitches and cut the yarn, leaving a 6-inch tail. Thread one end of the i-cord through the eyelets, weaving in and out around the entire circumference of the bag. When both ends of the cord emerge from the same eyelet (or adjacent eyelets), tie them together in a loose overhand knot, or thread each end through a wooden bead and tie a knot below the bead to keep it in place. Wooden beads, pom-poms, or tassels all make charming finishes for the drawstring ends.
Finishing
Weave in all ends carefully using your tapestry needle, taking care to bury the yarn tails inside the fabric so they are not visible from the outside. Block the bag by soaking it in cool water, gently pressing out the excess moisture with a towel, and then stuffing it loosely with tissue paper or a small plastic bag filled with air to help it hold its shape while it dries. Blocking will even out the stitches considerably and give the finished bag a much more polished appearance.
Sizing Variations
Small version (perfect for jewelry, a gift card, or a small ornament): Cast on 40 stitches. Work the seed stitch base for 4 rounds. Work the body pattern until the bag measures 4.5 inches. Complete the eyelet band and seed stitch top edge as written. Make an i-cord drawstring of approximately 24 inches.
Large version (perfect for a wine bottle, a rolled scarf, or a generous bundle of treats): Cast on 96 stitches. Work the seed stitch base for 6 rounds. Work the body pattern until the bag measures 11 inches. Complete the eyelet band and seed stitch top edge as written. Make an i-cord drawstring of approximately 44 inches.
Yarn Suggestions and Color Ideas
One of the greatest pleasures of making a gift bag is choosing yarn to suit the recipient. Here are a few ideas to spark your creativity.
For a classic, timeless look, a deep forest green or rich burgundy in a smooth merino DK gives the bag a refined, luxurious appearance that suits almost any occasion. Paired with a natural cream drawstring, this combination feels like something you might find in a high-end boutique.
For a holiday version, consider a deep red yarn with a sparkle thread held together. Many yarn companies produce limited-edition holiday yarns with subtle metallic shimmer, and working just one strand of a fine gold or silver thread alongside your main yarn can give the bag a festive glow without overwhelming the texture.
For a spring or summer gift bag, cottons and cotton blends in pale aqua, dusty rose, or soft sage green are lovely. These lighter yarns dry quickly and maintain their shape well, and they photograph beautifully if you are photographing gifts to share on social media or in a shop.
For a more rustic, natural aesthetic, an undyed or lightly hand-dyed yarn in natural tones — creams, tawny browns, soft grays — suits the woven-look stitch pattern particularly well. If you have access to small-batch indie dyers, a single-skein semi-solid in a rich jewel tone will make each bag look like an original piece of art.
Embellishment Ideas
The Margalo Gift Bag is beautiful as a plain, textured knit, but it also provides a lovely canvas for embellishment if you want to personalize each one.
Duplicate stitch: Once the bag is finished and blocked, you can add a simple motif in duplicate stitch — a small star, a heart, a monogram initial, or a tiny bird — using a tapestry needle and a contrasting yarn. Duplicate stitch sits right on top of the existing knitted stitches and mimics the look of fair isle colorwork without requiring you to manage multiple yarns while knitting.
Embroidery: A few simple embroidery stitches worked in embroidery floss or a fine yarn can add flowers, leaves, geometric shapes, or initials to the surface of the bag. French knots, lazy daisy stitches, and satin stitch all work beautifully on knitted fabric.
Beaded drawstring: As mentioned above, threading a wooden bead, a faceted glass bead, or a ceramic bead onto each end of the drawstring adds a lovely finishing touch. Look for beads with large enough holes to accommodate the i-cord, or use a tapestry needle to thread a length of strong thread through the bead and tie it to the end of the cord.
Crochet flowers or leaves: If you crochet, a simple crochet flower made from the same yarn or a contrasting color and stitched to the front of the bag adds dimension and charm. A three-petal crochet leaf alongside the flower gives a whimsical, garden-party feel.
Notes on Working Flat
If you are not comfortable working in the round or do not have double-pointed needles, the bag can be worked flat in two pieces and seamed.
Cast on 37 stitches for each panel (the odd number accommodates the seed stitch pattern symmetrically). Work the seed stitch base, body pattern, eyelet band, and top edge as written, adapting the stitch counts as needed for flat knitting. Sew the two panels together along the side and bottom edges using mattress stitch, which creates a nearly invisible seam on stockinette fabric. Because the woven-look body is mostly knit stitches, mattress stitch works very well here.
Frequently Asked Questions
Can I use bulky yarn for a faster knit? Yes, absolutely. If you scale up to a chunky or bulky yarn, cast on fewer stitches (start with 40 stitches on US size 10 needles) and adjust the body length accordingly. The texture stitch will be bolder and more pronounced at a larger gauge.
Is this pattern suitable for beginners? Yes, with some caveats. If you are comfortable knitting in the round and know how to work basic decreases and yarn-overs, this pattern is very approachable. The i-cord drawstring requires a small amount of additional technique, but it is easy to learn and well worth the effort. There are excellent video tutorials for i-cord on YouTube if you have never made one before.
How much yarn do I need if I’m making multiple bags? For a set of three standard-size bags, plan for approximately 360 yards of yarn. For a set of five, plan for 600 yards. Many DK weight skeins come in 200-yard or 250-yard amounts, so two skeins of a single color will cover a set of three to four bags with a little to spare.
Can I machine wash the finished bag? This depends entirely on your yarn choice. Wool bags should be hand washed in cool water and laid flat to dry. Cotton bags are generally machine washable on a gentle cycle. Check your yarn label for specific care instructions and include a small care tag if you are giving the bag as a gift.
Making a Set
One of the loveliest ways to give the Margalo Gift Bag is as a nesting set — three bags in small, medium, and large, all made from coordinating yarns. A set of three in graduated sizes, perhaps in shades of the same color family or in classic cream, warm gold, and deep brown, looks beautiful under a Christmas tree and functions as a reusable alternative to traditional gift wrap.
If you are knitting for a holiday craft fair or an Etsy shop, the Margalo Gift Bag is a genuinely practical item to produce in quantity because each bag takes only a few hours and the materials cost is low relative to the perceived value of the finished object. Pricing them as a set encourages multiple purchases and gives buyers a complete gifting solution.
Final Thoughts
The Margalo Gift Bag is the kind of pattern that quietly becomes a staple in your knitting repertoire — the thing you reach for when you need a gift that feels personal, when you have a skein of beautiful yarn without a plan, or when you want something satisfying to knit on a quiet evening. It asks little of you in terms of technique but returns a great deal in terms of the joy it creates, both in the making and in the giving.
Every time someone receives a handmade bag, they understand something about the time and care that went into it. They feel the weight of the yarn, notice the evenness of the stitches, and pull the drawstring closed with a small sense of ceremony. That is what handmade gifts do that no amount of bought wrapping paper can replicate — they carry something of the maker with them.
Happy knitting, and happy giving.
