Ask your friend whether or not he minds you dating his sister. Some friends have an invisible "friendship demarcation line" that they don't allow others to cross. Dating his sister may be one of the things that would be crossing that line.
Show respect to your friend by acknowledging his feelings. If he says that he has a problem with your dating his sister, then you have to make the decision whether or not the potential relationship is worth the possibility of losing a friend.
Treat your friend's sister with respect emotionally, verbally and physically if you choose to pursue a relationship with her. You must be polite, treat her well and stay faithful in the relationship or you're likely to lose the girl and the friend.
Avoid dating the sister as if she were a "Siamese twin." Spend quality time with the sister while her sibling is not around. If her sibling is always around when the two of you are together, the sister might get jealous because you are not spending enough time alone with her. Also, your friend might become jealous as some of the time you spent with him has been transferred to his sister.