A convertible garment, such as a jacket, tunic, sweater or vest, capable of being folded and converted into a carry-on bag and adapted for carrying articles normally carried in a handbag, briefcase, carry-on bag or suitcase, with pockets on the outside and in the lining portion of the garment, arranged so that the garment is not distorted by items carried within said pockets. The garment also has a back panel accessible from inside of the garment for carrying articles such as socks, underwear, shirts and trousers, with special compartments for such clothes. Zippers and hook and loop fasteners are used as closures for some of the pockets. A method for folding the garment and converting it into a conventional carry-on bag is also disclosed.