Fine fabric used to sheathe knight's weapon (5)
I believe the answer is:
lance
'weapon' is the definition.
(lance is a kind of weapon)
'fine fabric used to sheathe knight's' is the wordplay.
'fine fabric' becomes 'lace' (I've seen this before**).
'used to sheathe' means one lot of letters goes inside another.
'knight' becomes 'n' (chess).
'lace' placed around 'n' is 'LANCE'.
(Other definitions for lance that I've seen before include "Long, pointed weapon (5)." , "Chap" , "fish" , "Boy - prick (a boil)" , "Surgical knife" .)