To create a libary , you should use File -> New -> New Module -> Android Library. This will create a basic library project.

When that's done, you must have a project that is set up the following manner:

[project root directory]
    [library root directory]
    [gradle]
    build.gradle //project level
    gradle.properties
    gradlew
    gradlew.bat
    local.properties
    settings.gradle //this is important!

Your settings.gradle file must contain the following:

include ':[library root directory]'

Your [library root directory] must contain the following:

[libs]
[src]
   [main]
      [java]
         [library package]
   [test]
      [java]
         [library package]
build.gradle //"app"-level
proguard-rules.pro

Your "app"-level build.gradle file must contain the following:

apply plugin: 'com.android.library'

android {
    compileSdkVersion 23
    buildToolsVersion "23.0.2"

    defaultConfig {
        minSdkVersion 14
        targetSdkVersion 23
    }
}

With that, your project should be working fine!

To use the library, you must include it as a dependency with the following line:

compile project(':[library root directory]')

Perform the following steps to create the library:

1. Create a GitHub account.

2. Create a Git repository containing your library project.

3. Modify your library project's build.gradle file by adding the following code:

   apply plugin: 'com.github.dcendents.android-maven'
   
   ...
   
   // Build a jar with source files.
   task sourcesJar(type: Jar) {
       from android.sourceSets.main.java.srcDirs
       classifier = 'sources'
   }
   
   task javadoc(type: Javadoc) {
       failOnError  false
       source = android.sourceSets.main.java.sourceFiles
       classpath += project.files(android.getBootClasspath().join(File.pathSeparator))
       classpath += configurations.compile
   }
   
   // Build a jar with javadoc.
   task javadocJar(type: Jar, dependsOn: javadoc) {
       classifier = 'javadoc'
       from javadoc.destinationDir
   }
   
   artifacts {
       archives sourcesJar
       archives javadocJar
   }
   

   Make sure that you commit/push the above changes to GitHub.

4. Create a release from the current code on Github.

5. Run gradlew install on your code.

6. Your library is now available by the following dependency:

   compile 'com.github.[YourUser]:[github repository name]:[release tag]'