Go to the
http://travel.state.gov link I sent earlier, read what it says. Then download the passport application form. In the attached instructions (section 1.b.(1)):
(1) If You Claim Citizenship Through Naturalization of Parent(s). Submit the Certificate(s) of Naturalization of your parent(s), your foreign birth certificate, and proof of your admission to the United States for permanent residence.
It worked for my daughter (with my wife's natz cert). Reading the instructions can be a very rewarding experience.
The only hitch we had is that because we have different last names (the law where we come from), the state department folks also wanted a marriage certificate that showed we were married when my daughter was born.
So, just follow the instructions (you need a parent's natz cert, a birth cert, some id, the child's green card, whatever else it asks for) and throw in a marriage certificate for good measure.
Both parents need to go to the passport office or post office (which it also says in the instructions).
Good luck