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Step 1: Create a new 500px by 500px document with a white background.  Create a new layer called shape. Using the Rectangular Marquee Tool, Elliptical Marquee Tool, and Polygon Lasso Tool, draw some complex shapes in this new layer and use the Edit > Fill command from the menu to fill them with black.  Feel free to experiment here - I created the shape on the left using nothing but circles and rectangles.  Don't worry about the sharp edges - they'll all be gone when we're finished.

Step 2: When you are happy with your shape, press CTRL and click on the shape layer in the layers palette to make it the active selection.   Now go into the channels palette (you can get there by clicking on a tab above the layers palette).  Click on the create new channel button to make a new channel & call it alpha. With the selection still active, Edit > Fill the shape with white and then Select > Deselect. Now run the Filter > Blur > Gaussian Blur filter with a setting of 5 to 10, depending on how rounded you want the final shape.

Step 3: With the channels palette still active, click on Image > Adjust > Levels from the menu to open up a panel very similar to the one on the left. Drag the two outer triangles towards the centre until your shape looks nice and smooth.  Don't overdo it, though, or you'll get jaggies.   Once you are happy with your shape, hold CTRL and click on the alpha channel to create a new selection.

Step 4: Go back to the layers palette and create a new transparent layer.  Select it and then fill the shape selection with black using the Edit > Fill menu command.  Delete the old shape layer or make it invisible - you don't need it anymore.  And that's it - you now have a nice smooth shape which you can bevel, colour, and manipulate however you want!   Experiment lots with the principles of this tutorial and you'll go a long way to understanding the whole basis of interface design.  Have fun!

Quote from malboroman;22386: Well... the only way to get rid of those 'ugly pixels' is to switch to Illustrator and work with vectors. This is the best photoshop can do...

Agreed, 2 years after this reply. Hehe.

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Simple yet effective. Reminds me of a long forgotten tool called Image Styler. I still use it though. It gives so much freedom with alot less time lost in selecting and finding layers to fuse or diffuse parts or objects from your work. Pitty Adobe converted it to LiveMotion.

Note: And thank GOD livemotion is gone.

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Nice simple tutorial that importantly works and also gives an insight into a part of PS some might not even see, ie. Channels and Adjustment Levels.

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Thank you!! Those "jaggies" are certainly irritating!

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This method also works well for doing drastic enlargements of simpler shapes, such as logos. After resizing it, it will have gigantic "jaggies" but this method easily and quickly gets rid of them and smooths out the edge.

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