How to Create a Photoshop Smart Object
Photoshop introduced smart objects with CS2 and they can really save time and effort. Smart objects allow you to use the same object over and over again. Unlike selections you copy and paste, however, you can modify or remove transformations at any time, and, best of all, if any changes you make to the original will automatically update in the others.
Instructions
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Open the layers palette. Smart objects are controlled as layers, not as selections.
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Select a layer or group of layers. You can combine any Photoshop layers or layer groups into a smart object. "Shift" "+" select layers in a sequence, or "Command" "+" select layers that aren't in sequence.
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Choose "Convert to Smart Object" from the Layers palette Options menu. Access the menu by clicking on the triangle tab at the palette's top right corner. The layers will combine into a single layer with a small document icon showing in the layer thumbnail.
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Duplicate the smart object layer. You can drag the layer to the "Create a New Layer" icon in the palette toolbar, or choose "Layer via Copy" from the Layer menu New submenu. The copy will be linked to the original and reflect any changes.
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Double click any smart object layer thumbnail to make changes to the original layers. The original layers will open. Make any changes you want, and save the changes when prompted. The changes will appear in every copy of the smart object.
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Tips & Warnings
You can create a copy of your smart object that isn't linked to the original. Choose "New Smart Object via Copy" from the Layers menu Smart Object submenu. Any changes you make to the original will not update in this copy.
Smart objects are saved as embedded files within the Photoshop document. You can save them as external files with a .psb format to import into a different document later. However, the link between documents will be broken. Any changes to the external .psb file won't update in the Photoshop file.