Everyone has given some pretty good advice. So here's how I'd go about it. Use blue painters tape to cover the edge, just so you can work with the sheath, and not worry about the knife. For moisture protection I use grocery produce bags. The kind you find in rolls around the fruit 'n veggies at the store. They seem to be thinner than even saran wrap or standard grocery bags. If you don't already have something in mind for a smooth boning tool, many have used the handles of a basic kitchen silverware, table/butter knife. Many table setting styles have smooth stainless handles that actually work great. If your significant other had picked out table setting silverware with too many decorative ridges, stop by a thrift store and you'll find some great ones for $0.15.
Now wrap knife, wet leather (may take just a little, or a good amount of water to case depending on how it's already finished). If decorated or dyed with something water soluble, you may want to direct most of the water to the inside. Insert knife, and go to work smoothing to the shape you desire.
As Rick said above, drying in a slightly warm environment will help the leather stiffen a bit to hold shape. He mentioned to avoid an oven, but if you have an oven (or toaster oven large enough) that will go down 90-115 degrees, I've still used them. But keep an eye on it and check often. I have cooked a number of sheaths/holsters to the point of being unusable. Although, if I dyed a couple of the over cooked ones black, they may have been mistaken for kydex.
But just sitting out on a warm/hot sunny day will do the trick.
Be sure to come back and show us how it turned out....good or bad. We're all here to learn.
