WHEN HER DAUGHTER, JESSICA, WAS an infant in 1983, Karen Sebastian found out why necessity is called the mother of invention. It was motherhood, after all—and Jessica's diaper rash—that inspired Karen to create Cottontails, all-cotton, formfitting diapers that are hitting bottoms faster than bricks tossed into swimming pools.

Because Jessica's rash was aggravated by plastic, Karen first searched for a cotton diaper with the same fit as disposables. "I just assumed they were out there," says the 33-year-old Wimberley, Texas, mom. "When I found out they weren't, I went to the fabric store, bought the materials and made some."

Eight years later, Karen's washable, $6.95 nappy with Velcro tabs is being scooped up by rash-plagued—and environmentally concerned—parents in 40 states and on U.S. military base-around the world. "One lady told me her pediatrician recommended them, but it's the environmental issue that sells them," says Larna Szymanski, manager of a Houston baby-wear boutique that has sold the diapers since their retail debut last summer.

That's what Karen and hubby Mike, 46, Cottontails' cofounder, were counting on. Since Jessica's diapers had drawn so many comments from friends and acquaintances, the couple thought it would be easy taking the diapers to market. But they soon found themselves inundated with quality-control and manufacturing problems.

To better their business skills, Karen entered an MBA program at Southwest Texas State University, and Mike quit teaching sociology to work for MCI. "I soaked up as much as I could about marketing and sales strategy," he says. "I thought that company served as a paradigm for the one we wanted to create, since it had come out of nowhere and taken on giant AT&T."

Now, with 40 seamstresses and their own plant straddling the Texas-Mexico border, the couple is selling 30,000 dydees a month. (Twelve-packs come in reusable canvas totes, of course, with the Cottontails bunny logo.) They even work on weekends these days, dividing time between Jessica, now 8, and the fax machine at their three-bedroom, solar-heated home. While the Sebastians' environmental concerns have limited the diapers' distribution (they once turned down a 21-store chain that wanted them wrapped in plastic), the couple has high hopes. They envision their own trucks someday decorated with the bunny logo—multiplying like you know what.