Fold dish towel in half lengthwise, wrong side out; pin along the edge that's opposite the fold. Pin twill-tape ends to one open end to form hanger.
Sew a seam 7 inches from the folded edge to make a tube. Stitch twill tape in place.
Thread elastic through the towel's existing hem: Snip one small slit in the towel's hem. Flip tube over and repeat, making a second slit.
Tie a large knot at one end of elastic; attach safety pin to other end. Slide safety pin through 1 slit, and ease through hem and out other slit. Tie elastic ends to gather. Turn bag right side out. Snip line.