[android-studio] How to create a library project in Android Studio and an application project that uses the library project

Check out this link about multi project setups.

Some things to point out, make sure you have your settings.gradle updated to reference both the app and library modules.

settings.gradle: include ':app', ':libraries:lib1', ':libraries:lib2'

Also make sure that the app's build.gradle has the followng:

dependencies {
     compile project(':libraries:lib1')
}

You should have the following structure:

 MyProject/
  | settings.gradle
  + app/
    | build.gradle
  + libraries/
    + lib1/
       | build.gradle
    + lib2/
       | build.gradle

The app's build.gradle should use the com.android.application plugin while any libraries' build.gradle should use the com.android.library plugin.

The Android Studio IDE should update if you're able to build from the command line with this setup.