What to wear in a sauna splits cleanly into two questions with different answers. In your own cabin it is about materials and comfort. In a shared one it is about the rules of that room, which vary enormously by country and by venue. The materials part matters more than people expect, because heat is hard on fabric.
In your own sauna
A towel, either worn or sat on, is what most owners settle on, and many wear nothing under it. The important part is that you sit on something: bare skin on a hot bench is uncomfortable and towels keep the timber clean and dry. Anything you wear should be loose, natural fibre and dry when you go in.
Fabrics to avoid
Synthetics trap heat against the skin and some hold odour badly after repeated sessions. Anything tight restricts circulation exactly when your vessels are dilating. Damp swimwear is uncomfortable and keeps chlorine against your skin. Leave off jewelry and watches: metal reaches cabin temperature and will burn you.
In a public sauna
Practice varies. Traditional Finnish and German saunas are usually textile free and often mixed, with a towel to sit on. American gyms almost always require swimwear or shorts. Some venues run separate sessions with different rules. The rule is posted, and following the posted rule is the whole of the etiquette.
What to bring rather than wear
Two towels is the useful habit: one to sit on and one to dry with, so you are not putting a wet towel back on a hot bench. A wool or felt hat is common in hot traditional saunas because it keeps your head cooler than the air. Leave phones, books with glued spines and anything battery powered outside.
Questions people ask about what to wear in a sauna
Do you wear anything in a home sauna?
Most owners wear a towel or nothing, and sit on a towel either way. What you wear matters less than sitting on something.
Is swimwear a bad idea?
Dry and loose is fine. Wet swimwear is uncomfortable and holds chlorine against your skin for the whole session.
Why do people wear hats in a sauna?
A wool or felt hat insulates your head so it stays cooler than the air, which lets you sit comfortably in a hotter room.