Older Than Radio: Alice in Wonderland. It's worth noting that the actual text of the story doesn't specify what happens to Alice's clothes when she changes sizes, but you'd think it would warrant a mention if she were either running around naked or constantly creating makeshift clothes for herself. John Tenniel's illustrations from the book's original publication show this trope is in effect, depicting Alice wearing the same now famous outfit throughout the story. Pretty much every film version has followed suit, except for the Tim Burton one.
At one point in The Alloy of Law, a villain sets off a stick of dynamite in his hand to escape a trap (he's got a Healing Factor), his shirt is predictably destroyed, but his pants survive unscathed. Presumably Brandon Sanderson just didn't want to deal with the image of the guy running around naked.
Played With: In Animorphs the characters originally found themselves shrinking out of their clothes or tearing them up, but soon discovered that skintight clothing actually could morph with them. They generally wear their "morphing outfits" under their normal clothes. Later they meet Estrid, an Andalite morpher, who is skilled enough not to have this problem at all.
Played straight with the Helmacrons' shrinking technology; Cassie is relieved to note that, even though she was now the size of a housefly, her clothes had at least shrunk with her.
This didn't affect the cover artists, since many editions of the books show characters and their normal clothes transforming in stages (i.e., somebody wearing a red shirt transforming into a cardinal).
The TV series (when it showed transforming at all...) played this straight, with clothes transforming to and from animal forms with the wearer — for budget and decency reasons, one presumes.
Averted in the Anita Blake novels, lycanthropes transform by shedding their outer layer like, well, wet tissue paper. (If this sounds familiar, well, get used to it, it's Anita Blake.) This includes their clothes. Luckily for them, contracting lycanthropy apparently flips the brain's Body Modesty switch to "off".
In David Eddings' Belgariad tetradecalogy, a sorcerer's clothes and equipment go "somewhere" when they turn into animals, and reappear when they change back.
Actually, they are still "there" for a given value of where, since Belgarion can still feel the Orb.
"clothing space" is first mentioned by Eriond when explaining that his unnaturally fast horse (the horse that was revived by Belgarion after its stillbirth) actually takes shortcuts through there.
In the Tanya Huff book Blood Trail, the shapeshifters simply walk around naked or take off their clothes to change shape. Of course, there is also a very good reason for this — they are physically unable to shift form if wearing clothing (something about the 'unnatural' fiber interacting with their innate abilities).
Acknowledged near the beginning of The Cloud Roads. Raksura lose their clothes when transforming into their bigger, spikier, winged other forms; making sure that they have them when they turn back is "a bit of magic." It can work on items they're carrying, too.
Averted in the Changeling series by Steve Feasey. Whenever Trey transforms into a werewolf, his clothing is destroyed. However, this trope is played straight on the covers, usually showing Trey wearing a pair of rather ripped trousers.
Similarly, in the Discworld series of books, the werewolf Angua von Uberwald has to keep clothes stashed around the city of Ankh-Morpork. In Thud!, when she and the vampire Sally both end up completely naked after transforming into a wolf and a flock of bats respectively, they end up having to borrow clothes from a nearby strip club. It is explicitly stated that male vampires can reincorporate their clothes after shapeshifting, but female vampires cannot. This is probably a direct reference to Fanservice.
In Equal Rites, Esk's brother loses his clothes when she turns him into a pig, and remains naked when she turns him back again, leading Granny Weatherwax to testily demand "For pity's sake put some clothes on that child".
Played straight later on with Injun Joe aka Senior Council Member Listens-To-Wind, when he fights the skinwalker and 'kicks its ass up between its ears'. Either that, or he wasn't wearing any clothes at all, and created an illusion for decency's sake...
This also sometimes applies to their Time Travel device. When the heroes use it to travel back in time to visit an elderly Patton Burgess in the 1940s, they take nothing with them, including their clothes. But oddly, when a young Patton travels from the late 1800s to the twenty-first century, he brings his clothes with him.
The two shapeshifting Shi'ido in Galaxy of Fear go from clothed to unclothed forms with impunity, but when an unclothed form is damaged, it shows on the clothed form's skin and clothing. Presumably their clothing is just parts of their bodies. Subverted with Eppon, though, who outgrows his coverall and has to be given new clothes twice.
Completely averted in The Immortals series by Tamora Pierce, in which all transformations into animals result in loss of clothes, and all transformations back result in nakedness. Since there are a lot of transformations in the series, the pattern is noticeable.
In the novel Lonely Werewolf Girl, clothes just disappear when a werewolf transforms, and come back when they shift back. When a human who witnesses the process asks Kalyx what happens to the clothes, she says no one really knows.
Averted in the Mercy Thompson series. Clothing is not kept during shifting — and for werewolves, who become larger when they shift, it is torn. Werewolves and other shapeshifters will therefore discard their clothing prior to shifting if there is time to do so. As a side effect, shapeshifters (and those who live with them) tend to be comfortable with casual nudity. The exception is Charles, who can make clothes magically appear on his body due to his background.
The Percy Jackson and the Olympians series has Percy turned into a guinea pig briefly, and he shrinks out of his clothes during the transformation. When he's restored to human form, his clothes are miraculously on him.
Averted in the Piers AnthonyXanth books. When Nada, a shape-changing naga woman, becomes a snake, she slips out of her clothes and must then take the trouble of bringing them along and changing back into them when she becomes human.
Alternatively, there are other shape-changing characters in the same series who keep their clothes. In those cases, the clothing magically disappears when the character shifts, then re-appears when the character returns to their previous form. This has caused characters to remark on the difference in the story. A notable moment was one time when a clothing-losing shape-changer witnessed a clothing-keeping shape-changer, and wondered about the difference in their abilities (which was explained as one being a natural racial ability, and the other being a magical talent).
Generally played straight in Anne McCaffrey's Planet Pirate series. Wefts, the shapeshifting alien of the setting, are implied to shapeshift the appropriate clothing. Fanservice is generally avoided, however - they're naturally a species of crustacean with six sexes, and fall into the Uncanny Valley when assuming human form.
Averted in Seraphina. When Orma and Basind are ordered to shrink back into their saarantrai in the freezing snow, Seraphina reminds Lucian that the dragons have no clothes to protect themselves from the cold.
Sixty Eight Rooms: Their clothes shrink with them, but do so at slightly differing rates as them.
The shapeshifters in the Twilight series destroy their clothes when they transform. To solve this problem, once they get the transformation under control, they undress somewhere where no one will see them and tie them to a leg before transforming — apparently, this somehow saves the clothes. Characters often complain about this when they first begin shifting, Jacob even once getting angry that he accidentally shredded his last pair of underwear.
The movie doesn't really address this, but you can see scraps of destroyed clothing fly away whenever someone transforms into a werewolf.
Young Wizards: Averted in "Deep Wizardry" when Sree, a whale, tells Nita and Kit that they must remove their bathing suits before changing into whales.