I was pulling my hair out over this because Magento failed to produce an .htaccess file after I enabled url rewrites on my local dev server. I searched the old internets and found nothing! I ended up using the same .htaccess arguments as I do for WordPress and it worked great.
To enable url rewrites, go to System > Configuration > Web > Search Engines Optimization > Use Web Server Rewrites and choose yes.
Copy the following into a blank file and save it in the root of your Magento install as “.htaccess”:
<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /
RewriteRule ^index\.php$ – [L]
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /index.php [L]
</IfModule>