Flusi the Sock Monster by Bine Brandle

Flusi the Sock Monster delivers a delightful answer to the question, "What the snot is happening to all those socks that go mysteriously missing in the laundry?" Wouldn't you know it? Flusi is to blame. Little Maja befriends Flusi and together they figure out a better way to get the socks back into the drawer.

Benny's Summary: "First there's this girl, who cannot find her socks, but can find her favorite. Well, she did on one day. But when she put on the second sock, well, some sort of a creature was hiding in there. Maja was the girl's name, and suddenly something bit her! Flusi was the creature's name, and he was a sock monster. He introduced himself, and they became friends. Flusi said that socks had been everything to him. He used them as hats to keep him warm, and no one was supposed to see him. Well, since Maja already saw him, she was allowed to see him. One day, they played all day. That night, she put Flusi in a doll bed. He didn't really like it, and he made his escape to his very own cave. The cave was a sock monster cave. The next morning, Maja looked all over the whole house, her entire room, every entire room. She couldn't tell Mom about Flusi, because she remembered the promise. Then she found him at last. Maja had the perfect idea. To put him in a drawer... of socks! Flusi loved it. And they lived happily ever after."

Both the three year old and the seven year old found it funny and engaging.

Note: I won this book in a contest hosted by CHBM -- thanks for the contest, and thanks for sending me exactly the book I wanted from Kane/Miller. :D