As this lamb is going to wind up half inside a sweater pocket, we don't need to think about the legs, just the head and body. In the interest of further simplification, we're going to shift the basic shapes slightly to bring them into alignment, thus.
And that's what we've got to knit first.
This is where you have to draw on your own knowledge, experience, and preferences as a knitter. There are probably as many ways to realize those shapes in knitting as there are knitters. You could, for example, simply knit up two stockinette shapes in the appropriate sizes.
On the other hand, as this lamb will be placed against a stockinette ground, why not try out a textured stitch to give it a little more visual oomph? Maybe the render the fluffy body in moss stitch?
Let's try it. Cast on as many stitches as you think you need, and go.
Not bad. Good enough to continue. In fact, rather than knit two pieces, what if we used texture to suggest the separation between head and body? Maybe render the face in stockinette? And we could throw in a pair of decreases at the "shoulder" line for shaping.
Promising. Enough to go on. I find that when you're improvising like this, it's extremely important to make frequent stops for assessment–something I learned from Maggie Righetti in Knitting in Plain English. When I started knitting I felt guilty about constantly pausing to look at my work, until I read Maggie's sound advice that you should do so to decide if you like it–and rip it back if you don't. That has saved me a lot of time and trouble.
So, here's the finished body and head in one piece.
It's okay. The top corners are a bit sharp, but maybe they can be fudged in the sewing. But the face looks sunken when it should project forward, as a glance at the model shows.
We could undo the head. Or, before we go that far, we could try knitting the lamb a little oval snoot, since that's the bit that really sticks out in the original, and apply it over the stockinette face. Maybe that'd counteract the sunken effect. It'll only take a few minutes.
Hmm. Not bad. Let's sew it down, and tuck a bunch of yarn ends underneath to give it a little extra volume.
And there we are–the basic shapes are in place. It's not quite ready to baaaaaaaa, but it's gettin' there.
Next time, we'll finish up by adding the details to the face and head.
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(Yeah, I played Dungeons and Dragons as a kid. You wanna make something of it?)