How to create a O/S level user on EC2 Linux instance in AWS

Login as ec2-user
  Sudo su –
Create user if not already there give him password
   Passwd username
Create / add a user called abhutta with home directory, enter:
# useradd -m abhutta

Setup A Password For abhutta

Type the following command:
# passwd abhutta

Then vi this file as root
vi   /etc/ssh/sshd_config  ===>> change following configurations

#PasswordAuthentication yes  ===>>remove # from this line 
#PermitEmptyPasswords no
PasswordAuthentication no  ===>>add # before the line

and save it.

reload the service as root:
service sshd reload

Now open another session and try loging in with user abhutta on your EC2 instance.