I have about four long-sleeved onesies in the 3-6 month size that have been too short for about three months. I was going to pass them along to a friend's friend but then realized I could use them again. The trickiest part about a dress or tunic can be getting the collar and sleeves right and since the width and arm size of the onesie still fit her I was able to just cut off the bottom and half of my job was done!
You'll need a long-sleeved onesie, stabilizer (or heat-n-bond if you're out of stabilizer), a thick band of black elastic that is the circumference of your onesie plus 1" (my elastic was 2" wide), a cut of fabric that is the circumference of your onesie plus 12" and about as long as you prefer (mine was 10"), straight pins, scissors, an iron, and a sewing machine.
I cut the sleeves down to where they would hit her elbows and left them raw since jersey cotton tends to roll nicely. I then measured where I wanted the elastic to lay and cut. Next, (not shown) I followed the manufacturers instructions to apply the stabilizer (heat-n-bond). This can be torn off when finished and provides stability so the jersey cotton doesn't stretch out when you are sewing.
Next, cut your fabric piece in half so that you have two equal pieces. Measure in from each top edge 1" and then mark a line from that point to the bottom corner of the same side to get an angle. Trim. Lay your two pieces with right sides facing together and sew your sides together. Then fold the bottom edge up 1/4" and again 1/4" and pin. Then iron and sew. Because it is longer at the bottom than the top and you're folding up you'll have a little extra so just fold it in at the side seams as you stitch. Confused yet?
Stick your top into the bottom upside down with the right side of the onesie facing the right side of the skirt and pin with even amounts of fabric in between. Make sure the edges are lined up.
Stitch them together making little pleats as you go.
Turn your dress right side out and press your pleats down flat.
At this point you can bypass the elastic and just add your own embellishments such as a HUGE bow (not a good idea if they love tummy time), ruffles, or pockets.
If you're using elastic, start at one side seam and pin the elastic down all the way around. My elastic covered a little more onesie than it did skirt fabric. Using a zig-zag stitch, first sew around the lower edge of the elastic and then the upper edge. Make sure you aren't pulling it to fit as you don't want it to be too snug on your little one. When you get to the end of your elastic, tuck it under before you stitch it down for a finished look.
And you're done! As long as the top fits you can transition it from a dress to a tunic as she grows.