In order to paint terrain, it is necessary to use different Sandbox components. Please refer to the Creating a New MapLevel tutorial to prepare to use this tutorial. See Terrain Painting Tips and Tricks for additional information.
Select the layer that you wish you edit.
Click Change Layer Texture on the left toolbar of the Terrain Texture Layers:
Alternatively, you can also use the Layer -> Load Texture menu option.
This opens will open the "Preview" file dialog box. Select an appropriate low resolution .dds texture from the Terrain folder.
Alternatively you can bring up the preview dialog via the Layer menu and select Load Texturetexture.
For most cases you will want to use a low-noise, mid-gray texture such as
Textures/defaults/grey.dds, as this gives you the most amount of flexibility when it comes to color information.
Changing a Layer's Material