Cloth used in muslin ensigns (5)
I believe the answer is:
'cloth' is the definition.
(I know that linen is a type of cloth)
'in muslin ensigns' is the wordplay.
'in' says the answer is hidden in the clue.
'LINEN' can be found hidden inside 'muslin ensigns'.
'used' acts as a link.
(Other definitions for linen that I've seen before include "Fabric made from flax" , "bedclothes perhaps" , "Sheets, pillowcases etc" , "underwear" , "Flaxen fabric" .)