“Wrapped him in cloths” is the Aorist, Active, Indicative of the Verb SPARGANOO, σπαργανόω that means, “To wrap in swaddling clothes, or to swathe.” SPARGANOO is used for strips of cloth like bandages, wrapped around young infants to keep their limbs straight, and to help the baby transition from the womb (a very snug place) to the outside world. It was a word that appeared in ancient medical writings. In NT times, the baby was wrapped in a large square of cloth and strips of cloth were tied around the square to keep it in place. In ancient times, like today, a swaddled infant was safe if wrapped and watched properly.
In the LXX, the word occurs just twice, both times metaphorically. In Ezek 16:4, wicked Jerusalem is compared to a newborn; uncared for, cast out, not wrapped in swaddling clothes. In Job 38:9, the Lord speaks of His creation of the sea as though it were a newborn which He wrapped in the swaddling clothes of the mist. In light of the OT usage, this probably carries the unspoken implication that the baby Jesus was treated with love and properly cared for.
Another instance of SPARGANOO occurs in the Apocryphal book Wisdom of Solomon 7:4, that reads, “I was nursed in swaddling clothes, and that with cares.” This is Solomon recounting his birth as the future king of Israel, being the son of David, as he was born in a humble state just as all are born, vs. 5-6, “For there is no king that had any other beginning of birth. 6For all men have one entrance into life, and the like going out.” With this we see another allusion to the birth of Jesus Christ: humbly born, as the king of Israel, as the Son of David.
SPARGANOO is only used in the NT here and in vs. 12, at the angel of the Lord’s announcement to the shepherds in the field as a “sign” of the baby born “today in the city of David,” who was “Savior, who is Christ the Lord,” vs. 11.
Some believe there was an additional emphasis to this, in that the wrapping of the baby was a further sign to the shepherds who were watching over the sacrificial lambs. They are called “Levitical shepherds,” who upon the birth of a lamb would wrap them with cloth to keep them “without spot or blemish,” so that they would qualify as sacrificial lambs cf. Num 6:14. Thus, this ties Jesus’ birth with His sacrifice upon the Cross as THE sacrificial lamb, Heb 9:14; 1 Peter 1:19.
Some also believe the swaddling clothes were a foreshadowing, a prophetic reference, of Jesus’ burial cloths. Although it may have symbolism, it cannot be shown linguistically, as the Greek word SPARGANOO is only used here and in vs. 12, and it is never used in the NT to refer to burial cloth. In the descriptions of Jesus’ burial, we see variations on the phrase “wrapped in linen cloth,” and different Greek words are used like ENTULISSO for “wrap,” and SINDON or OTHONION for “linen or cloth.” The swaddling clothes could prefigure Jesus’ burial, as the Magis’ gift of myrrh in Mat 2:11 did, but the link cannot be proved linguistically.
Other than the symbolism of being loved and cared for, Luke is laying the foundation for the “sign” the Jewish shepherds would receive to know that this baby was the one foretold to them by the Angel of the Lord, vs. 8-12, as this word is only used here and in vs. 12.