Lay the towel on a cleared working surface lengthwise. Fold 10 inches of the bottom up (or approximately one fourth of the towel). Repeat the process so you have about half of the towel remaining at the top, and the bottom fold is doubled.
Turn the towel over, being careful not to upset the folds you've already made. With the previous folds at the bottom of the towel, fold the right third of the towel toward the middle. Bring the left side over on top of the previous fold.
Bring the top of the towel down, folding it in half lengthwise. Turn the towel over and you'll see the pocket at the bottom for holding a washcloth. Fold the washcloth into thirds and tuck into the pocket for a decorative look.