Here is what I have done, but in Applet form. Anyone who knows how to convert my algorithm to GUI based program?

Here goes,

import java.awt.*;
import java.awt.event.*;
import javax.swing.*;
import javax.swing.border.LineBorder;

public class TicTacToe extends JApplet {
// Indicate which player has a turn; initially it is the X player
private char whoseTurn = 'X';

// Create and initialize cells
private Cell[][] cells = new Cell[3][3];

// Create and initialize a status label
private JLabel jlblStatus = new JLabel ("X's turn to play");

/** Initialize UI */
public TicTacToe() {
JPanel p = new JPanel(new GridLayout(3, 3, 0, 0));
for (int i = 0; i < 3; i++)
for (int j = 0; j < 3; j++)
p.add(cells[i][j] = new Cell());

// Set line borders on the cell panel and the status label
p.setBorder(new LineBorder(Color.red, 1));
jlblStatus.setBorder(new LineBorder(Color.yellow, 1));

// Place the panel and the label to the applet
add(p, BorderLayout.CENTER);
add(jlblStatus, BorderLayout.SOUTH);
}

/** Determine if the cells are all occupied */
public boolean isFull() {
for (int i = 0; i < 3; i++)
for (int j = 0; j < 3; j++)
if (cells[i][j].getToken() == ' ')
return false;

return true;
}

/** Determine if the player with the specified token wins */
public boolean isWon(char token) {
for (int i = 0; i < 3; i++)
if ((cells[i][0].getToken() == token)
&&(cells[i][1].getToken() == token)
&&(cells[i][2].getToken() == token)) {
return true;
}

for (int j = 0; j < 3; j++)
if ((cells[0][j].getToken() == token)
&& (cells[1][j].getToken() == token)
&& (cells[2][j].getToken() == token)) {
return true;
}

if ((cells[0][0].getToken() == token)
&& (cells[1][1].getToken() == token)
&& (cells[2][2].getToken() == token)) {
return true;
}

if ((cells[0][2].getToken() == token)
&& (cells[1][1].getToken() == token)
&& (cells[2][0].getToken() == token)) {
return true;
}

return false;
}

// An inner class for a cell
public class Cell extends JPanel {
// Token used for this cell
private char token = ' ';

public Cell() {
setBorder(new LineBorder(Color.black, 1));
addMouseListener(new MyMouseListener());
}

/**Return token */
public char getToken() {
return token;
}
/** Set a new token */
public void setToken(char c) {
token = c;
repaint();
}

/** Paint the cell */
protected void paintComponent(Graphics g) {
super.paintComponent(g);

if (token == 'X') {
g.drawLine(10, 10, getWidth() - 10, getHeight() - 10);
g.drawLine(getWidth() - 10, 10, 10, getHeight() - 10);
}
else if (token == '0') {
g.drawOval(10, 10, getWidth() - 20, getHeight() - 20);
}
}

private class MyMouseListener extends MouseAdapter {
/** Handle mouse click on a cell */
public void mouseClicked(MouseEvent e) {
// If cell is empty and game is not over
if (token == ' ' && whoseTurn != ' ') {
setToken(whoseTurn);

//Check game status
if (isWon(whoseTurn)) {
jlblStatus.setText(whoseTurn + "Win! The game is over");
whoseTurn = ' ';
}
else if (isFull()) {
jlblStatus.setText("Draw! The game is over");
whoseTurn = ' ';
}
else {
// Change the turn
whoseTurn = (whoseTurn == 'X') ? '0': 'X';
// Display whose turn
jlblStatus.setText(whoseTurn + "'s turn");
}
}
}
}
}
}