DexIndexOverflowException issue after updating to latest appcompat and support library

I'm using the below settings through gradle:

compileSdkVersion 21
ANDROID_BUILD_MIN_SDK_VERSION=14
ANDROID_BUILD_TARGET_SDK_VERSION=21
ANDROID_BUILD_TOOLS_VERSION=21.0.2
ANDROID_BUILD_SDK_VERSION=21

I also have the following settings in my gradle file:

compile 'com.android.support:support-annotations:21.0.0'
compile 'com.android.support:appcompat-v7:21.0.0'
compile 'com.android.support:support-v4:21.0.0'

I always get the error UNEXPECTED TOP LEVEL EXCEPTION.
But when I make the 21.0.0 to 20.0.0 it works fine...but i'm not able to access any of the Android API 21 options. Is there something i'm doing wrong here? How do I get it to compile without this exception? I do not have the support jars anywhere else outside of other grade projects (facebook etc.).

Here is the full stack trace:

UNEXPECTED TOP-LEVEL EXCEPTION:
com.android.dex.DexIndexOverflowException: method ID not in [0, 0xffff]: 65536
    at com.android.dx.merge.DexMerger$6.updateIndex(DexMerger.java:502)
    at com.android.dx.merge.DexMerger$IdMerger.mergeSorted(DexMerger.java:283)
    at com.android.dx.merge.DexMerger.mergeMethodIds(DexMerger.java:491)
    at com.android.dx.merge.DexMerger.mergeDexes(DexMerger.java:168)
    at com.android.dx.merge.DexMerger.merge(DexMerger.java:189)
    at com.android.dx.command.dexer.Main.mergeLibraryDexBuffers(Main.java:454)
    at com.android.dx.command.dexer.Main.runMonoDex(Main.java:302)
    at com.android.dx.command.dexer.Main.run(Main.java:245)
    at com.android.dx.command.dexer.Main.main(Main.java:214)
    at com.android.dx.command.Main.main(Main.java:106)

This message sounds like your project is too large.

You have too many methods. There can only be 65536 methods for dex.

Since the gradle plugin 0.14.0 and the Build Tools 21.1.0 you can use the multidex support.

Just add these lines in the build.gradle:

android {

    defaultConfig {
        ...

        // Enabling multidex support.
        multiDexEnabled true
    }
    ...
}

dependencies {
  compile 'com.android.support:multidex:1.0.1'
}

Also in your Manifest add the MultiDexApplication class from the multidex support library to the application element

<?xml version="1.0" encoding="utf-8"?>
<manifest xmlns:android="http://schemas.android.com/apk/res/android"
    package="com.example.android.multidex.myapplication">
    <application
        ...
        android:name="android.support.multidex.MultiDexApplication"> 
        ...
    </application>
</manifest>

If you are using a own Application class, change the parent class from Application to MultiDexApplication.

1) add dependency to application build.gradle file

compile 'com.android.support:multidex:1.0.2'

2) If you do not override the Application class, edit your manifest file to set android:name in the tag as follows:

<?xml version="1.0" encoding="utf-8"?>
<manifest xmlns:android="http://schemas.android.com/apk/res/android"
    package="com.example.myapp">
    <application
            android:name="android.support.multidex.MultiDexApplication" >
        ...
    </application>
</manifest>

If you do override the Application class, change it to extend MultiDexApplication (if possible) as follows:

public class MyApplication extends MultiDexApplication { ... }

Or if you do override the Application class but it's not possible to change the base class, then you can instead override the attachBaseContext() method and call MultiDex.install(this) to enable multidex:

public class MyApplication extends SomeOtherApplication {
  @Override
  protected void attachBaseContext(Context base) {
     super.attachBaseContext(base);
     MultiDex.install(this);
  }
}

3) Add multidex support to defaultConfig at build.gradle

defaultConfig {
        ...
        minSdkVersion 16
        targetSdkVersion 26
        ...
        // Enabling multidex support.
        multiDexEnabled true
    }
...

Before messing around with MultiDex

It either solution is too big (use MultiDex) or you compile and include in your project some not needed stuff. I got this issue on my tiny project. Here is what I did to fix it:

I removed this from build.gradle:

dependencies {
    compile fileTree(dir: 'libs', include: ['*.jar'])
}

And I manually removed my build folder from application root. Problem fixed.

Follow this guide to workaround 65K limit.

I solved this issue in gradle by setting multiDexEnabled true and extending my application with class MyApp extends MultiDexApplication