A lot of cloth is made from plant fibers (cotton from cotton, linen from flax, burlap from hemp, etc). Try dropping a villager on various non-food plant materials - as long as you've got cutting tools the villagers should go grab one and start harvesting.

Follow where the villager takes the harvested plant life and you should figure out step two (tip: salt water).

Since that step is the equivalent of separating the fibers out in the real world, the next step would logically be to compress the fibers back together as cloth. The villagers don't seem to have a loom, but there's another plant product that could serve as inspiration. In fact, you might be writing these hints down on it right now!