The Gimp

From NibleWiki

The Gimp is an open-source graphics program, which comes in handy when creating textures and normal maps. Besides the MS-Windows edition, there are editions for many other platforms available.

Download: Gimp.org

[edit] Plugins

The DDS-Plugin allows The Gimp to read and write the DirectX Texture format DDS. This is the preferred texture format for Morrowind (BMP and TGA are allowed as well), and the only one allowed for Oblivion.

A compression algorithm DX3 with generated Mipmaps fits best for Textures - leave the Mipmap Option unchecked for Icons.

Download: DDS-Plugin

The Normal map Plugin calculates the normal maps essential for Oblivion textures.

Download: Normalmap-Plugin