I bought this shirt for a dollar at my local thrift shop and then didn't like how it fit, there was also a tear in the back I hadn't noticed. Being somewhat frugal (OK, OK I'm cheap) I didn't want it to go to waste. The bag was quick to make, too. From start to finish, even stopping to take pictures, it only took me an hour.
First I cut across the shirt right under the sleeves. Then I cut a 2 inch strip off of both sides, these will be the handles. If your shirt is long sleeve and you want longer handles you can cut them out of the sleeves.
The hemmed edge will be the top of the bag so turn it around and cut a 2" square out of each of the bottom corners. If your shirt has a shaped hem you will have to cut it and turn over the edge for the top. If you quilt, I'm sure you can find a use for the 2 " squares as well as the rest of the leftover fabric.
Sew the button placket closed. Although I didn't have to, depending on your shirt you may have to remove the buttons. You can sew them back on if you want or replace them with some funky buttons from your button jar. (Everybody has a button jar don't they?) Then, with right sides together, sew down the sides and along the bottom with a 1/4" seam leaving the 2" square area open.
Holding the corners of the space you cut the 2" square from pull out so that side and bottom seam match-up. Sew this closed with a 1/4" seam. This will square off (actually it's a rectangle) the bottom of the bag. 
Turn the strips for the handles so that right sides are together and sew a 1/4" seam along edges. Turn them right side out to attatch them to bag. You will need to use a ruler to measure an equal distance from each end to place the handles. You don't want them too close together or too wide apart, you'll just have to judge where you want to put them. Sew them to the bag with two lines of stitching at least 1/2" apart.
Here's the finished bag. (Disclaimer: Knitting needles are for display only, since I crochet) The size of your bag will vary depending on the size of the shirt you use. When I get around to it, I have a BBQ to go to right now, I'm going to take one of the buttons from the rest of the shirt and put it nearer the top just because I think it will look better. 
