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How can the circular dotted effect be easily applied to the edge of a rectangle in Photoshop? I tried using the lasso tool on a rectangle I create but couldn't get even spacing.

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I'm going to suggest you don't use Photoshop to make your shape, but use Illustrator instead. It's much easier. Of course you can then use the vector shape as a mask in Photoshop.

  1. Create a pattern Brush in Illustrator. All you need is a single shape like this. A square with a circular piece cut out. I used Path Finder Minus front to create it. Then drag it to the Brushes dialog, and select Pattern Brush as the the brush type.

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  1. Then apply the brush to a rectangle.

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  1. Select the shape, then do Object > Expand Appearance, and Object > Clipping Mask > Release, then use the Shape Builder tool to delete the corner circles which have filled in, and unite the shape as one. Obviously, make sure the finished rectangle has a black fill.

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Then you can click and drag the rectangle shape into Photoshop, and clip an image layer to the shape.

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The beauty of this method is that you will have a Vector Smart Object layer which can be resized and applied to any image without any blurring/degradation in image quality.

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  • Do I see a connection problem / hairline there between the different segments in the pattern brush? It's relatively obvious in the bottom border of the your last screenshot.
    – Vincent
    May 7 at 9:31
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    @Vincent - Fixed!
    – Billy Kerr
    May 7 at 9:55
  • Can you provide a sample project file for this please?
    – SD826E
    May 11 at 18:47
  • @SD8256E Sorry, no. I didn't save it.
    – Billy Kerr
    May 11 at 19:17
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I will take advantage of Photoshop selection tool and masking.

Draw a circle and duplicate it multiple times. Move the last circle and 1st circle layer at both ends so you can use alignment tools and distribute spaces between all of them, like this:

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Group all the circles, and twist overall size according to requirements and so that it also crops corners of your rectangle.

Rastererize whole group and make a selection of it or individually make a selection of each circle (Cntl + Shift + Click). And then go to Select > Inverse.

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Select your rectangle layer and create a mask. Then hide the circles layer. Repeat same for other edges.

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This method might seem a bit complicated and not so perfect in terms of measurement and size. But that's what I know at the moment. I feel there could be any easier way, maybe using Patterns. Some experienced users might answer that later.

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