There are different ways to do it. At it's simplest, you can just squeeze the leather handle washers on tight (with threaded butt cap, peened butt cap, etc...) with no glue at all. Shape the handle to almost finished. Then soak the leather handle in boiling parafin wax long enough for it to really penetrate (it will also give the knife tang some rust protection). Then final finish it out. The wax will make everything a solid block and preserve the leather. If it's done right, it will last forever.

If you want to use glue, a rubber cement like Barge is fine, but you still need to wax or preserve the leather. I've done a couple of them and used both methods. It's just really what you think is best/easier for you.

The couple of production leather handle knives I know are all made without any sort of glue. If you use paraffin wax as said earlier the leather will turn into almost hard plastic like and literally indestructible.