Find an image that you like and crop it to make your character really special
The games use three different sized portraits. For custom protagonist portraits only the smaller two are required, which both go into the 'portraits' folder in the game's directory (i.e. C:\Program Files\Baldur's Gate\Portraits). The file name can't be longer than seven characters + the ending S, M or L.
To replace a companion's portrait all three files are required with the exact same file names as used in the game. These files go into the 'override' folder in the game's directory (i.e. C:\Program Files\Baldur's Gate\Override). A list of all companion portraits plus file names can be found here.