"Plarn" is a word formation derived from the words "plastic" and "yarn." The word "Plarn" is typically used to refer to plastic bags that have been cut up and re-purposed into yarn for crocheting, knitting, or other crafts.
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A Related Post in the Frugal Living Forum:
Trash Into Cash: See how one innovative crafter crocheted with plarn and sold the resulting projects for extra spending cash.

