Cut off the bottom 6 inches of the bottle, using scissors or a craft knife. Make the cut straight as you will need both the top and bottom half of the bottle.
Fill the bottom of the bottle with a 2-inch layer of small pebbles. The pebbles allow excess moisture to drain out of the potting soil.
Cover the pebbles with a thin layer of activated charcoal, which helps prevent fungal problems in the bottle. Place a 1/2 inch layer of sphagnum moss on top the charcoal.
Combine equal parts potting soil, peat moss and coarse sand. Add water to the mixture until it's moist but not soggy. Fill the remainder of the bottle bottom with the potting mixture.
Plant the cactus in the potting soil. Set it in the soil at the same depth the cactus was growing at previously.
Slide the top part of the bottle onto the bottom portion. Squeeze the bottom as you slide on the top so it fits inside the top of the bottle.
Remove the lid from the bottle so air can circulate and moisture can escape. Keep your cactus in a brightly lit, warm area. Water only when the soil begins to dry out completely.