You first create the filter with fspecial and then convolve the image with the filter using imfilter (which works on multidimensional images as in the example).
You specify sigma and hsize in fspecial.
%%# Read an image
I = imread('peppers.png');
%# Create the gaussian filter with hsize = [5 5] and sigma = 2
G = fspecial('gaussian',[5 5],2);
%# Filter it
Ig = imfilter(I,G,'same');
%# Display
imshow(Ig)