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Find a dowel rod approximately the same size as the original handle. Remove the blade of the putty knife from the old handle. Place the blade over the dowel to figure out how far to cut into the dowel to create a slot for the blade. Next, make a mark on the dowel to indicate where to cut. Make two circle marks to indicate the place where to drill clearance holes to screw the blade into the dowel. Use the existing screw holes as a guide.
Cut a groove into each of the two pieces of 2" x 4" boards (Image 1). The groove should be big enough to fit the dowel rod. Place the rod between the two pieces of 2" x 4" and then clamp the pieces together. Next, clamp the whole thing across a moving saddle fence on the table saw (Image 2). Make the cut.
Remove the clamps, but leave the dowel rod in the blocks. Take the pieces to a drill press and push the top block back just far enough to drill the hole. Keeping the dowel in between the two blocks will allow the dowel to be held steady during the drilling process. Using the marks made earlier, drill clearance holes for the screws. Finally, attach the putty knife blade to its new handle.