The walls and ceiling are usually lined with 1x4 tongue-and-groove western red cedar panels. You can use select tight knot (STK) or clear (no knots) varieties depending on your aesthetic preference. STK is a bit cheaper and, I think, a bit more interesting to look at. Installation is relatively easy: you start with a level board about a half inch above the floor and then work your way up, rechecking for level every few boards.
A nail gun (see the toolbox) loaded with 1 1/8 inch galvanized nails is essential. You install the boards groove-down and nail at a 45 degree angle downward through the tongue and into a wall stud. With the grooves facing down, water can't collect in them. Nailing through the tongues means that your nailheads get covered by the groove from the board above — this is critical to limit the amount of exposed metal in the sauna. If you are using an electric nailgun it may not be punchy enough to consistently fully sink the nails; you may need to countersink the nails by hand after installing each board.
If you planned your framing correctly, there will be studs available at the appropriate corners for securing the ends of each panel. For refit projects, you may need to sister some studs at the wall and ceiling corners.
The only functional issue with knots is that they tend to get hotter than the surrounding wood. So you might want to invest some time sorting the boards before installing so that you'll end up with the knottiest panels near the floor and on the ceiling. The clear or nearly clear pieces you can reserve for "high traffic" areas just above the upper benches.
At some point you'll be installing lining over various bench and heater supports that you'll be able to feel just beneath the vapor barrier. Mark where these crossbeams are on top of the lining so you don't lose track of them when it comes time to screw in your bench-support blocks and heater hooks.
Finish the ceiling completely before you finish the walls. At the top of each wall, you'll likely be left with a gap of under 3.5 inches (the width of your panels). So the uppermost panel in each wall will have to be cut to size at least 1/4 inch smaller than the gap — that way you'll have room to maneuver those panels into place. Any remaining gap gets covered by moulding.
Be sure to install and test the heater and light before you wall up the area behind the control panel.
The final step is to cover all of the corner gaps with 1x1 cedar moulding. Do the ceiling corners now if you like, but wait until the benches are in before doing the walls.
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