How do I create this blur effect on the squares?

[LillaBjorn]

I don't care about the mirror effect just the blur effect. I tried but for some reason I didn't find the solution.

[c.pfaffenbichler]

Have you tried a Gaussian Blur as Smart Filter? 

[LillaBjorn]

Yes but I will try again. What color are you using?

[LillaBjorn]

Mine just gets blurry edges with the blur tools.

[c.pfaffenbichler · Accepted solution]

I was not talking about »Blur Tools«, Gaussian Blur is a Filter. 

And you can just create a simple rectangular Selection (with the Rectangular Marquee Tool) before applying the Filter to the Smart Object. 

[Leslie Moak Murray]

I'm pretty sure it's the Gaussian Blur filter, and I am the one who marked @c.pfaffenbichler 's answer correct. You can play with the slider until you get the desired effect.