The basics:
1) A good metal straightedge
2) A sharp knife
3) A pair of harness/saddle maker's needles
4) An awl (lots of guys will say it's better to use a drill, but I'll stick with an awl and I sew leather for a living. But one man's opinion and all that....)
5) Thread and beeswax
6) A stitchmarker (I like a 6 or 7 stitch per inch wheel, but a 5 stitch per inch is often better especially for beginners.
You can even buy a stitching kit from Tandy Leather or Leather Factory that will include everything above except the knife and straightedge.
In addition though I would suggest a stitch groover or a good pair of dividers and a #2 or #3 edger.
Another book that illustrates how to make a sheath is Al Stohlman's "Making Leather Cases, vol 2". It's also available at Tandy or Leather Factory.
Tools such as a belt sander and buffer are helpful, but I made well over a thousand knife sheaths as well as an even larger number of holsters, belts, and so forth, before I ever owned either one and still use them on a limited basis as I learned the traditional leather working methods first.
Beyond those tools listed there are hundreds of specialized leather tools especially for doing decoration, but what I first is listed are all you need to get started. Total cost should run under $30.00 even if you buy everything new.