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I have an image with color (in photoshop), it is 512x512 with a radius of 80. This image has several blending options like color overlay, gradient, pattern overlay, etc.

I am trying to export this image to illustrator so I can add a 3d effects but when I import it to illustrator, and select the image, the outline is boxed and not curved to the radius so when I add the 3d effect, it's essentially a cornered box and not a rounded box.

How do I get the outline to snap to the edge of the image and not edge of the canvas size?

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In Photoshop you are working on bitmaps while in Illustrator you are working on vectors. It'a a big difference.

When you are pasting your work done in PS into Illustrator you place a bitmap - a rectangle (unless you are working with paths). If you want the image to have a different form you should draw a vector shape and mask the image with this shape, like shown here

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