You'll need to equip a W-Item materia (available only when you return to Midgar late in the game).

Select the item you want to duplicate, then select a second item but don't actually use go through with using them.

Instead toggle back and forth between selecting and deselecting the second item.

It should increase the number of items in your inventory.

It's perfect for maximizing hard-to-get items like Vagrisk Claws and Earth Mallets.

Practice with Potions until you get the hang of it.