Due to its exciting physical properties and sheet-like geometry graphene is in the focus of attention both from the point of view of basic science and of potential applications. In order to fully exploit the advantage of the sheet-like geometry very high resolution, crystallographicaly controlled lithography has to be used. Graphene is a zero gap semiconductor, so that a field effect transistor (FET) will not have an "off" state unless a forbidden gap is created. Such a gap can be produced confining the electronic wave functions by etching narrow graphene nanoribbons (GNRs) typically of a few nanometers in width and with well defined crystallographic orientation. We developed the first lithographic method able to achieve GNRs that have both nanometer widths and well defined crystallographic orientation. The lithographic process is carried out by the local oxidation of the sample surface under the tip of a scanning tunneling microscopy (STM). Crystallographic orientation is defined by acquiring atomic resolution images of the surface to be patterned. The cutting of trenches with controlled depth and of a few nanometer in width, folding and manipulation of single graphene layers is demonstrated. The narrowest GNR cut by our method is of 2.5 nm width, scanning tunneling spectroscopy (STS) showed that it has a gap of 0.5 eV, comparable to that of germanium, which allows room temperature operation of graphene nanodevices.