Let’s face it, as illegal as graffiti is, it looks pretty cool in most respects. Graphically, it’s awesome if you’re trying to achieve a grungy, urban kind of feel. In light of this, I’ve put together a tutorial on a few ways you can make this effect for text. (On an additional note, I apologize for the rather small image sizes. Please right-click and select “View Image” for a larger size.)
Once you’ve got Photoshop open, find a good rough texture. I’d suggest something along the lines of brick or concrete. Or you can use this one which I’ve decided to work with for this tutorial. You can load it into any size document. The size I went with is 1000 x 700. Load your texture and we can get started.

Get a cool font and type your desired text. The font I’ve used here is called PT Banana Split.

Double click on your text layer to open up the Layer Styles panel and select “Gradient Overlay”. You can honestly play around as much as you want with the settings – this just decides on the color scheme of your text. I decided to go with a reddish-orange gradient (#FF7800 for the bottom and #FF2A00 for the top).

Now, this clashes pretty badly with the wall texture, so let’s fix that with a Stroke effect. With the Layer Styles panel still open on your text layer, select “Stroke”. Again, you can play around with the settings until you find what works.

To get a good, convincing effect, I like to add a few paint drips. After all, graffiti isn’t supposed to look clean. Create a new, blank layer below your text layer and merge your text layer down. This makes it easier to do the detail work without having the layer styles getting in the way. Select your brush tool on a hard, round brush and find a size that works. Select the color of your Stroke effect and draw in a few drips.

Using the Eyedropper tool, select a color inside of the Stroke effect on the edge of a letter and draw a drip. If you’re going to draw multiple, you’ll need to use the Eyedropper tool each time because of the gradient effect. This step is optional, but I think it adds a bit more flavor to the image.

Now we get into the Blend Modes. Depending on how intense you want your text, you can either go for Overlay or Soft Light. I went with Overlay, just because I like the contrast of the image.

As a finishing touch on your image, add a light Gaussian Blur. By checking and unchecking the “Preview” box, you can see the image with and without the blur applied. It can be difficult to tell the difference when you’re only using a very small measure. This just helps get a good sense of how much you need.

And there you have it! A rather convincing graffiti effect for your text. These steps can also be applied to images, although I would generally suggest skipping the Gradient Overlay and Stroke and just messing around with the Threshold adjustment. It makes for a more convincing effect. Enjoy!
