Rounded rectangles are a common design element in mobile apps and website design, and they show up frequently in print advertising. In terms of design, a rounded rectangle is a rectangle with an attribute called "corner radius." Corner radius is expressed in points, and represents the radius of a subtended circle cut off by the shape you're drawing. Most designs use a corner radius between four and 12 points, though larger shapes will need proportionately larger radii. The following techniques work for Illustrator Creative Cloud and date back through every version of Creative Suite.
Using the Rounded Rectangle Tool
The easiest way (and most common way) to set the corner radius on an object is with the "Rounded Rectangle" tool. Select the tool in the floating toolbar, and click on the artboard. A dialog box will open with the height and width of the object you're drawing, and the corner radius.
Adjusting Corner Radius on the Fly
You can change the corner radius of an object on the fly while dragging the mouse cursor. The "Up" arrow key and "Down" arrow key will increase and decrease the corner radius, respectively. The "Right" arrow key will make the most rounded corners possible for a given size of a shape, and the "Left" arrow key will make standard right-angle corners.
Setting the Global Corner Radius Preference
If you're going to be using a lot of rounded rectangles in a design, and want to keep a consistent corner radius on them, click on the "Edit" menu, then select "Preferences" and then "General" and set the corner radius in the dialog box. (For Mac OS X Mavericks, the "Edit" menu is the "Illustrator" menu. This will change the corner radius for any new rounded rectangles you create.
Rounding the Corners of Other Shapes
You can round the corners of any object by selecting it, and then clicking on "Effects," then "Stylize" and then selecting "Round Corners" in the first Stylize sub-menu. You can specify the corner radius you need there. This is handy when dealing with shapes that aren't squares, or when doing complex, multi-element designs.
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