What is this weird transparent border appearing inside my Smart Object in Photoshop?

Question

I've been pulling my hair out trying to understand what's going on here.

I have an image which is of a book and its shadow. The book part is opaque, and the shadow part has semi-transparency. This is shown here with a plain white background so you can see it. The background is actually transparent.

This is then made into a Smart Object, and scaled down, and placed on top of a background. Now, out of nowhere, a pixel of transparency appears at the border between the opaque book and its shadow:

To be clear, the book and its shadow are a single raster pixel layer inside the Smart Object; and there is no empty pixel between them!

Anyone have an idea what is going on?

Answer 1

The issue is because of the used image interpolation method: probably it's set to Bicubic Automatic. The thing about this method is that it applies additional post-processing to make image look better, which includes some sharpen. And this halo along the edge you see is a result of this processing.

When transforming normal layers it's possible to set image interpolation from the free transform modal: so setting interpolation to Bilinear would solve this issue.

However for whatever reason this dropdown isn't available for smart objects: they use interpolation method that is set in Photoshop preferences.

So to solve this issue, set Image Interpolation in Preferences > General to Bilinear and edit your smart object again. Here's a quick comparison: with Bicubic interpolation on the left and Bilinear on the right: