Transpose the song to a key that is comfortable for the guitar. Certain keys work better on the guitar than others. Incorporating open strings into an arrangement provides the guitarist with more flexibility and options.
Concentrate on the melody line. It is usually necessary to lower the melody line an octave on the guitar to make it sound good. Play the melody in the original key. Experiment with alternate keys in order to find the one that works best for the guitar. Experiment by playing the melody on different parts of the fretboard. It is possible to play almost all the notes on the guitar in several places. This is one of characteristics that distinguishes guitars from the piano.
Chart the chord structure, first in the original key. Then transpose the chords to the new key. Sheet music, for popular music, usually includes chord diagrams for the guitar. This will make the job easier. However, if the sheet music is exclusively for the piano, you will have to figure out the chord structure on your own.
Work out ideas for combining the melody with the chordal structure. At this point you will need to be selective and tasteful. Since the guitar does not have the harmonic range of the piano, it is not possible to play all the chords and harmonic accompaniment. One option is to imply chords by playing intervals and bass notes rather than full chords. A second option is to incorporate the melody line within an arpeggio structure. This allows you the freedom to play a fuller chord without having to play all the notes simultaneously. The arrangement depends on your interpretation of the song. Sometimes a strong bass line works the best to imply the underlying harmonies and chords. Experiment with different combinations and patterns.
Fine-tune your arrangement. Decide on the best combination that allows the melody to be played fluidly while keeping the chords and harmony intact. Ask yourself if your arrangement meets the two goals of playability and faithfully representing the song.