out of the box, Adobe Photoshop has no option to save files as .ICO or icon files. One option is to make a bitmap (.bmp) image first and then rename it to .ico . However that creates a problem with icon backgrounds occasionally. Then there are the more expensive additives or plugins. But now you can make, edit and save icon files with Photoshop without spending a single dime using the Icon Plugin by Sibcode.
The Icon Plugin is a small (~ 700 k) Photoshop extension. it lets you export or save image files as icon or .ICO files, fully compatible with Windows XP. This plugin supports a wide range of features including multi-format icons, transparency and semi-transparency. The icons created can also be made Windows Vista compatible from the icon creation dialogue by enabling .png compression. It also supports non-standard icons of different sizes, colors and resolutions, including monochrome, 16 colors, 256 colors, 24-bit True Color, and 32-bit True Color with semi-transparency. The users also have the handy option to add/remove sub-icons from the root icon file.
Icon Plugin is compatible with a slew of front running image/graphics editors like Elements, AfterEffects, Premiere, PhotoDeluxe, Corel PhotoPaint, PaintShop Pro, Painter, and Photo. As for OS compatibility, for the time being, this plugin goes fine with Windows, no MAC/Linux support (sorry apple/unix boys and girls). The plugin is a freeware and comes compressed in a zip file. The installation instructions are available in a tidy "read me" file inside the package. Go on, start belching out cute icons with Photoshop today.
Download Plugin
Source: Download Squad