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I have a landuse layer as an ArcGIS shapefile which looks like this (here only a small sample part)

enter image description here

The round shape of the lightgreen area results from a buffer and as the borders of this feature are not exactly clear I would like to create a blend/gradient change for the final cartographic layout (only between the round light green 'buffer' shape and the darkgreen area). This landuse layer is in vector format (ArcGIS shapefile).

I was wondering if there is an easy way to achieve this either in ArcGIS 10, Adobe Illustrator or Photoshop (would include a Polygon to Raster conversion first and therefore lead to information loss as it is rasterized)?

Later I would like to drape the landuse layer over a hillshade with burned in rivers using a transparency of about 20% like this.

enter image description here

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I'm going to go ahead and expand my comment into an answer.

While this is not a solution for ArcGIS, Illustrator, or Photoshop, I feel it would be perfectly valid to do this in QGIS.

In the style tab of the Properties Dialog, you can choose gradient fill.

enter image description here

You'll want a two colour radial gradient, where the second colour is transparent. Then, set the reference point to centroid.

You can do something similar to another layer, but this time, set the first colour to transparent. The two layers will blend together. You can also set the transparency on the whole layer using the slider at the bottom of the dialog.

An even cooler option would be to use the shapeburst fill instead of gradient fill. This follows the edges of the shape you're filling.

Play around with the settings to get the effects you require.

Here's an example of something similar I did: enter image description here

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