Recipe taken from Cheese Making at Home for Yogurt.
Makes one gallon
You need yogurt as a starter culture to make more yogurt. Initially, use a thick store-bought yogurt that is labeled as containing active cultures. Some of the thinner brands of yogurt aren't as successful in making yogurt. Once you have made it, save a little of your own homemade yogurt for each new batch you make. You can use skim milk to make yogurt and save the cream to make butter or sour cream.
1 gallon whole or skim milk
1/2 cup cultured plain yogurt.
Heat milk to 115-120 degrees.
Pour 1/2 cup of yogurt into a wide-mouth glass jar
Pour the milk into the jar with the yogurt starter. Stir briefly with a wire whisk to mix the yogurt into the milk.
Screw on the lid. Wrap the jar with a bath towel. Set the jar in a warm spot for 4-6 hours. Don't disturb the jar during the incubation period. When the yogurt is thick, unwrap the jar and store it in the refrigerator. Let chill before using or it will separate. Be sure to save 1/2 cup for starting your next batch.
Notes:
The first two steps in this recipe tell you how to pasteurize the milk which, in my opinion, defeats the purpose of making yogurt from fresh, raw milk. I have omitted these steps.
I warm my oven for a couple of minutes on the lowest setting and then turn the oven off and place the towel wrapped yogurt in the oven overnight.
An insulated cooler can be used to keep yogurt warm.