Drupal's limits on upload file size are determined by your server's
PHP settings (as well as Drupal specified settings that can be set at
Admin > Site Configuration > File Upload). The default values for PHP
will restrict you to a maximum 2 MB upload file size.
On the settings page for the upload module, Drupal calculates and
displays the maximum file size that you can set based upon two PHP
settings: 'post_max_size' and 'upload_max_filesize'. Since
'post_max_size' is the limit for all the content of your post, many
people choose 'post_max_size' to be a multiple of
'upload_max_filesize' to allow multiple files to be uploaded, but this
is not essential. The upload module limits the size of a single
attachment to be less than either post_max_size, or
upload_max_filesize, whichever is smaller. The default PHP values are
2 MB for upload_max_filesize, and 8 MB for post_max_size.
Depending on your host, changing these two PHP variables can be done
in a number of places with the most likely being php.ini or .htaccess
(depending on your hosting situation).
For example, to increase the limit on uploaded files to 10 MB:
Add the below to the relevant php.ini file (recommended, if you have access). Note that for some hosts this is a system-wide setting.
However, for hosts running PHP as a CGI script with suexec (for
example) you may be able to put these directives in a php.ini file in
your Drupal root directory.
upload_max_filesize = 10M
post_max_size = 10M
Add the below to your .htaccess file in your Drupal root directory.
php_value upload_max_filesize 10M
php_value post_max_size 10M
The PHP documentation states that the memory_limit setting also
affects file uploading. Generally speaking, memory_limit should be
larger than post_max_size. If this is an issue, see the page on how to
Increase memory available to PHP (3 methods)
Drupal also allows/enforces its own size limits, independently of what
PHP allows. These are found in Drupal 6 at "Administer » Site
configuration » File uploads" ( /admin/settings/uploads ). In Drupal 7
size limit is controlled on per-field basis. The Drupal settings
cannot be larger than those permitted by PHP, but may be smaller if
you haven't updated them, so remember to check there also, after
updating the php.ini.
Also, make sure your permissions are set correctly from your public/private folders you've set Drupal for file handling. The folders are located at /admin/config/media/file-system