Photoshop 5.5 and earlier doesn't have a tool for creating rounded rectangles, but the process is fairly simple. There's several ways to do rounded corners, but this is the method I've found to be the fastest. In Photoshop 6.0 and higher you can use the rounded rectangle shape tool.
Difficulty: Average
Time Required: 5 minutes
Here's How:
- Use the Rectangle Marquee tool to create a rectangular selection.
- Type Q to switch to Quick Mask mode.
- Go to Filter > Blur Gaussian Blur.
- Adjust the radius for the amount of curve you want for the corners. The higher the number the more rounded the corners will be. Click OK.
- Go to Image > Adjust > Levels.
- Drag the black and white sliders toward the center of the histogram to create a hard edge. Click OK.
- Type Q to exit Quick Mask mode.
- Use the Paint Bucket Tool to fill with the color of your choice.
Tips:
- Check the preview box in the Gaussian blur and Levels dialog boxes to see the results of your changes.
- Use layer effects 'Drop Shadow' and 'Bevel and Emboss' to create a button.
- This technique can be used to create rounded corners for a variety of shapes.
- For more precision, set Photoshop to show a grid, then combine circular and rectangular selections to create your shape. See the selections lesson in the Photoshop Basics Class.

