Determine the instruments you will be using for your arrangement. Generally, as a minimum, you will want to be able to represent the rhythm, melody, and harmony of a lead sheet song. Nearly all instruments can be rhythmic, though not all can be both melodic and harmonic. However, if you can sing the melody and play the harmony with a chording instrument, you could even do an arrangement for and perform the piece yourself. The instruments you choose will greatly affect the character of the piece of music.
Choose an appropriate song to arrange. Now that you know which instruments you are arranging for, you will want to play a song that your fellow musicians are capable of playing and performing well. Certain styles of music have certain conventions. For example, if you are playing a jazz standard, you will probably want, at the minimum, piano or guitar (for playing the melody or chording), a melody instrument (brass, woodwind) or singer, bass, and drums. Alternatively, a Sousa march might not be appropriate for this configuration of musicians.
Choose which instruments will play the melody and the accompaniment parts. Distributing different duties to different instruments is important, as particular instruments are good at specific things. For instance, you may want to have a trumpet play the melody, since it cannot play harmony parts. From here, you could have a chording instrument play the accompaniment part, and a percussive instrument play a rhythm part. Some instruments, though, can mix roles. If you have a saxophone in addition to the trumpet, you could have them play the melody in unison or play a harmonized melody together.
Identify the components of, and arrange the form of, your tune. Usually a lead sheet will show the basic form of the tune with regard to verse/chorus structure (AABA, ABAA, etc.) and genre (blues, rock, reggae, etc.). By playing through the melody a couple of times, you should be able to discern between verse, choruses, bridges, and other sections of the music. It is up to you as the arranger to decide how many times you will repeat each written section, and in what order.
Rehearse your new arrangement of the lead sheet with your group of musicians. Try playing through the arrangement you've made as everyone learns his part. As you play along, you may need to change things; sometimes you may want to repeat a section an additional time, or cut another section that gets boring. It is up to your taste as the arranger to make these decisions.