Horizontal Multi Level Drop Down Sub Menu Links Blogger,you can show submenus in drop down form in top menu of your blogger as this is drop down menu to show of the subcategories under the certain category to make of the browsing for the reader easy and simple to find what he wants,as this was used in wordpress blogs but now you can use it in blogger blogspot too.

Demo of Horizontal Multi Level Drop Down Sub Menu Links:- Horizontal Menu Links Demo

The tutorials i hold before on horizontal top menu links for blogger without the drop down sub menu are below:-
1)Top Menu Links For Blogger
2)Horizontal Menu Links For Blogger
3)LinkList As Horizontal Top Menu Links For Blogger

Now let's carry On with our tutorial

Just Go To Layout > Edit Html

And Search For </b:skin>

Now add these below Css codes before it-

.ddsmoothmenu{
font: bold 12px Verdana;
background: #414141; /*background of menu bar (default state)*/
width: 100%;
}

.ddsmoothmenu ul{
z-index:100;
margin: 0;
padding: 0;
list-style-type: none;
}

/*Top level list items*/
.ddsmoothmenu ul li{
position: relative;
display: inline;
float: left;
}

/*Top level menu link items style*/
.ddsmoothmenu ul li a{
display: block;
background: #414141; /*background of menu items (default state)*/
color: white;
padding: 8px 10px;
border-right: 1px solid #778;
color: #2d2b2b;
text-decoration: none;
}

* html .ddsmoothmenu ul li a{ /*IE6 hack to get sub menu links to behave correctly*/
display: inline-block;
}

.ddsmoothmenu ul li a:link, .ddsmoothmenu ul li a:visited{
color: white;
}

.ddsmoothmenu ul li a.selected{ /*CSS class that's dynamically added to the currently active menu items' LI A element*/
background: black;
color: white;
}

.ddsmoothmenu ul li a:hover{
background: black; /*background of menu items during onmouseover (hover state)*/
color: white;
}

/*1st sub level menu*/
.ddsmoothmenu ul li ul{
position: absolute;
left: 0;
display: none; /*collapse all sub menus to begin with*/
visibility: hidden;
}

/*Sub level menu list items (undo style from Top level List Items)*/
.ddsmoothmenu ul li ul li{
display: list-item;
float: none;
}

/*All subsequent sub menu levels vertical offset after 1st level sub menu */
.ddsmoothmenu ul li ul li ul{
top: 0;
}

/* Sub level menu links style */
.ddsmoothmenu ul li ul li a{
font: normal 13px Verdana;
width: 160px; /*width of sub menus*/
padding: 5px;
margin: 0;
border-top-width: 0;
border-bottom: 1px solid gray;
}

/* Holly Hack for IE \*/
* html .ddsmoothmenu{height: 1%;} /*Holly Hack for IE7 and below*/


/* ######### CSS classes applied to down and right arrow images ######### */

.downarrowclass{
position: absolute;
top: 12px;
right: 7px;
}

.rightarrowclass{
position: absolute;
top: 6px;
right: 5px;
}

/* ######### CSS for shadow added to sub menus ######### */

.ddshadow{
position: absolute;
left: 0;
top: 0;
width: 0;
height: 0;
background: silver;
}

.toplevelshadow{ /*shadow opacity. Doesn't work in IE*/
opacity: 0.8;
}

Now search for </head> and place the below codes before it.

<script src='http://ajax.googleapis.com/ajax/libs/jquery/1.3.2/jquery.min.js' type='text/javascript'/>
<script src='http://btemplatescripts.googlecode.com/files/ddsmoothmenu.txt' type='text/javascript'/>

Now Search for below codes-

<div id='header-wrapper'>
<b:section class='header' id='header' maxwidgets='1' showaddelement='no'>
<b:widget id='Header1' locked='true' title='Testing templates (Header)' type='Header'/>
</b:section>
</div>

And add the below codes after the above codes:-

<div class='ddsmoothmenu' id='smoothmenu1'>
<ul>
<li><a href='http://www.anshuldudeja.com'>Item 1</a></li>
<li><a href='#'>Folder 0</a>
<ul>
<li><a href='#'>Sub Item 1.1</a></li>
<li><a href='#'>Sub Item 1.2</a></li>
<li><a href='#'>Sub Item 1.3</a></li>
<li><a href='#'>Sub Item 1.4</a></li>
<li><a href='#'>Sub Item 1.2</a></li>
<li><a href='#'>Sub Item 1.3</a></li>
<li><a href='#'>Sub Item 1.4</a></li>
</ul>
</li>
<li><a href='#'>Folder 1</a>
<ul>
<li><a href='#'>Sub Item 1.1</a></li>
<li><a href='#'>Sub Item 1.2</a></li>
<li><a href='#'>Sub Item 1.3</a></li>
<li><a href='#'>Sub Item 1.4</a></li>
<li><a href='#'>Sub Item 1.2</a></li>
<li><a href='#'>Sub Item 1.3</a></li>
<li><a href='#'>Sub Item 1.4</a></li>
</ul>
</li>
<li><a href='#'>Item 3</a></li>
<li><a href='#'>Folder 2</a>
<ul>
<li><a href='#'>Sub Item 2.1</a></li>
<li><a href='#'>Folder 2.1</a>
<ul>
<li><a href='#'>Sub Item 2.1.1</a></li>
<li><a href='#'>Sub Item 2.1.2</a></li>
<li><a href='#'>Folder 3.1.1</a>
<ul>
<li><a href='#'>Sub Item 3.1.1.1</a></li>
<li><a href='#'>Sub Item 3.1.1.2</a></li>
<li><a href='#'>Sub Item 3.1.1.3</a></li>
<li><a href='#'>Sub Item 3.1.1.4</a></li>
<li><a href='#'>Sub Item 3.1.1.5</a></li>
</ul>
</li>
<li><a href='#'>Sub Item 2.1.4</a></li>
</ul>
</li>
</ul>
</li>
<li><a href='http://www.anshuldudeja.com/'>Item 4</a></li>
</ul>
<br style='clear: left'/>
</div>

Thats It Now Preview It.If its working fine just save your template.

You can download the tutorial and files needed for back up from given link Files And Tutorial

Change the names and links whatever you want to be shown in your blogger in above codes as you have to do this manually but its good if you wanna show sub category under some category.
You can make look your blog as you have subcategories for categories in your blogspot blog by hiding the labels in sidebar widget and giving the category names so as you can create subcategory of any.
Its so easy,i hope will like this tutorial.
Source:-Dynamicdrive