Clear the space. Remove all of the furniture and decorative accessories that currently fill the room, giving you an open space to work with.
Update the walls. If you are satisfied with the paint or wallpaper that is currently on the walls, keep it. However, if you want to completely transform the space, paint the walls or hang new wallpaper to suits your taste.
Cover the floor with an area rug. An area rug brings warmth to the space and helps to ground it. Choose an area rug that complements your taste. Lay the rug where you intend to place the sitting area to define this focal area in the room.
Bring in new furniture. Select items that are comfortable; a settee and wingback chairs for a formal look, or a wicker sofa and chairs for a more casual look. Arrange the pieces so that they allow for easy conversation. For instance, place the sofa against the wall and set the chairs, side-by-side, across from it. Include a coffee table and end tables to provide guests with a surface to rest their drinks.
Replace the lighting. Chances are there is a chandelier hanging from the ceiling in the middle of your formal dining room. Remove the chandelier and replace it with a fixture that isn't as low slung, or simply eliminate a lighting fixture from the ceiling altogether. Place lamps on end tables and set floor lamps in the corners of the room.
Add decorative accents. Hang framed photographs of your family on the walls. Display collectibles on wall shelves and tabletops. Place potted plants in the corners of the room.