I have a library and a Android app using Gradle and Android Studio. I can include the library directly in the project as following
compile project(\':library
Publish de library on your local maven repository and then on your gradle use
repositories { mavenLocal() }
If you have other repositories listed, make sure your mavenLocal appears first.
Docs: section 51.6.4 on https://gradle.org/docs/current/userguide/dependency_management.html