Here is the short version:
In the material editor window: File -> Regenerate Materials ...
Select Mods\%yourMod%\Assets\Materials
Click "Generate HLSL and GLSL"
After generation is complete, select Add Resource -> Material ... in the Resource Manager window.
Select the <materialName>.lsb file that was generated in the previous step, select a package from your mod. (You can leave the "Data mod" empty).
For some reason, the editor forgets the name of my material the first time I do this, so I end up with an unnamed material in the content browser. If you have the same issue, right click -> Rename/Move... and click OK. It'll fix the name issue.
If you have tex/scalar/etc parameters, you should also specify those in the next window.