Never stir the butter while it is cooking, and keep a close eye on the color so that the ghee doesn’t burn.
Melt one pound of unsalted butter in a sauce pan on medium heat. The better the butter, the better the ghee, so try to use organic butter. As the butter melts it will begin to boil and separate (white froth on top with sediment settling to the bottom of pan.) Keep the butter boiling steadily. Do not stir. Allow the butter to continue to cook until the bubbling noise quiets down, the sediment at the bottom of the pan starts to turn golden brown (you can check the color of the sediment by gently tilting the pan), and the liquid under the froth begins to turn an amber color. (This process usually takes about 20 minutes.) The smell will be something like fresh baked bread or popcorn. All these signs indicate that all the water has evaporated, and that you must turn off the heat immediately or the ghee will burn quickly. Leave the cooked ghee to cool for half an hour, then line a strainer with cheese cloth and strain the ghee into sterilized containers. Discard the sediment. The ghee will turn hard when cooled and look yellow in color. If properly made, ghee will keep for over a year, even if stored outside of the refrigerator.