This was posted on The Fresh Loaf by dwcoleman a few days ago.
There are two methods for almond paste that I know of. The recipe below is the quick and dirty one. The other is much longer and requires cooking sugar, etc.
If you are making paste to keep for a long time, make sure you freeze it.
Recipes - Bread - Almond Paste
454g blanched almonds
454g confectioners' sugar
3 egg whites
1 teaspoon almond extract
Grind almonds in a blender. Thoroughly mix in sugar, beat egg whites slightly, then stir into the almond mixture.
Add almond extract using hands to blend heavy mixture.
The only place I've found it reasonably priced is Lakeside Baking Supplies, but I think you have to buy 10lb. I usually use almond meal and sugar, since that is all it is made from. Almond meal is easy to find at one of the middle eastern/persian stores, eg balboa international market, sometimes at north park produce, and also henrys (much more expensive)