Inspired by this Sweet Baby Cap pattern
The nice thing about this cap is that it is knit in the round, thus there are no seams to sew that may be uncomfy to a baby's head. Previously blogged HERE.

Sizes: 6-12 months (12-18 months)
Note that baby heads come in a WIDE variety of sizes. :-)

Yarn: Frog Tree Cotton, Sports; 1 skein, 123 yards; or yarn to create similar gauge I highly recommend natural fibers, though!

Needles: 1 Set of US 5 DPs (3.75 mm)
Gauge: 15 stitches = 2.5 inches (6.5 cm); 12 rows = 1.5 inches (4cm)

An explanation of standard knitting abbreviations can be found HERE.

PATTERN (I goofed up in my original post. This is the *updated* version.)

Cast on 103 (121) stitches. Divide stitches as evenly as possible onto 4 DPs, being careful not to twist stitches. Join to the round.
Round 1: Purl
Round 2: Knit
Round 3&4: Purl
Round 5: Knit

Proceed as follows:
Round 1: k1, m1, k15 (18), sl1, k2tog tbl, psso, k20 (24), kfb, kfb, k9 (11), sl1, k2tog tbl, psso, k9 (11), kfb, kfb, k20 (24), sl1, k2tog tbl, psso, k15 (18), m1, k1
Round 2: Knit all stitches
Repeat these two rounds 5 (6) more times, ending with a Round 2.

Proceed as follows:
Round A: Continue to work as in Round 1, but work only the sl1, k2tog tbl, psso decreases, NOT the m1 or kfb increases! Thus far with each round your knitting retained the same amount of stitches, from now on you will actually decrease! I haven't charted this row by row, but hope this explanation will suffice.
Round B: Knit all stitches
Repeat rounds A and B until 7 stitches remain, ending with a Round A. Break the yarn leaving a 6" tail & using a yarn darner, thread through remaining stitches. Weave in loose ends. For ties, pick up three stitches and work an i-cord* for app. 8". * When working an i-cord, work is not turned. Instead of turning the work around to work back and forth, slide all stitches to the other end of the needle, switch the needle back to your left hand, bring the yarn around the back of the work, and start knitting the stitches again, tugging them tight. Repeat to desired length.

http://www.ravelry.com/patterns/library/baby-pilot-style-hat-pattern