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In addition to view based application template, I made a second view controller. When I open it's XIB in IB, I can't reduce the size of the view. It remains fullscreen. I want this view to contain some buttons only and then place this as a subview on another view.

+7  A: 

It's likely because you have some of the "Simulated Interface Elements" turned on (in View Attributes)... probably the Status Bar, which is set to "Gray" by default. Make sure they are all set to "None", and then adjust away.

I run into this frequently myself.

Shaggy Frog