Worsted yarn wife found in fish basket (6)
I believe the answer is:
crewel
'worsted yarn' is the definition.
(worsted yarn is a type of fabric)
'wife found in fish basket' is the wordplay.
'wife' becomes 'w'.
'found in' means one lot of letters goes inside another.
'fish basket' becomes 'creel' (basket for storing fish).
'w' placed within 'creel' is 'CREWEL'.
(Other definitions for crewel that I've seen before include "Twisted yarn for tapestry or embroidery" , "Fine worsted yarn" .)