Cut off the seam of the t-shirt. Save this piece for later.
Also, stretch out the bottom. It's not absolutely necessary, but it gives a little more room.

Next, cut off the neck. If you want to, you can make a v-neck or a scoop neck. Stretch it out a bit.
If you're going to do this, only do it in the front. If you cut the back along with it, it'll fall off your shoulders.

Now cut off the sleeves! Stretch 'em out, too.

With the shirt facing up, flatten it out. Along the sides below the arms, cut about 1 centimeter in, all the way down to the bottom of the shirt. You can make it larger if you want to show more skin.

No picture, sorry!

This one takes the most time.
Braid it all the way down on both sides of the shirt using this technique:
http://www.youtube.com/watch?v=O6SWN4_IhAA

At the end, where you have two loops, take a piece of ribbon and tie them together.
I double-knotted to make sure.

You don't necessarily need ribbon for this step. You can use t-shirt scraps.
Or if you really want to, you can sew it together, but then it wouldn't be a nosewbraid&bow!

Remember the seam we cut from the bottom of the shirt? Time to use it!

Stretch it a bit to give it more length. Then cut it somewhere so you have one long piece.

Thread the seam through a braid on the side about 2 inches below the bottom of the arm holes.

Sorry, can't think of a better word for "arm holes." D:

It'll look something like this now.
Just tie it in the back when you put it on and... voila!