Secure the piece of bone between the jaws of a bench vise.
Oil the length of the bone. A dash of mineral oil will do. Simply rub it down the length of the bone. This will reduce the dust raised from sanding and carving.
Sand the bone in one direction. Run down the sandpaper in bold strokes to create a uniform sheen.
Mark the outline you want of the handle with a pencil.
Start carving the marked area. First etch the outline into the bone and then scrape off the areas outside the etched design. Sand regularly as you carve so that you can see the curvature of the handle as it forms. Make sure to cut out the slit into which the end of the knife blade will enter the handle.
Buff the bone on a buffing wheel. After this the bone handle will be all smooth. Oil it until it acquires a fine sheen.