To edit a referenced drawing from within the current drawing, you use the working set to identify objects that belong to the xref or block definition rather than the current drawing.
While editing a reference in place, you can add or remove objects from the working set. If you create a new object while editing a reference in place, it is almost always added to the working set automatically. Objects that are not added to the working set are displayed as faded in the drawing.
If a new object is created because of changes made to objects outside the working set, the new object is not added to the working set. For example, your drawing contains two lines that are not a part of the working set. If you edit the lines by using FILLET, a new arc is created between the two lines. The arc is not added to the working set.
When a reference object is part of the working set, you can select the object for editing even if it is drawn on a locked layer in the reference file. You can unlock the object's layer and make changes to the object. Changes made to the object can be saved, but the layer state remains the same in the reference file, whether it is locked or unlocked.
An object that is removed from the working set is added to the host drawing and removed from the reference when changes are saved back. An object that is added to the working set is removed from the host drawing and is added to the reference when changes are saved back. If you create or delete objects, they are automatically added to or removed from the working set. For example, if you use ERASE while editing a reference in place, the erased objects are removed from the working set. You can tell whether an object is in the working set or not by the way it is displayed; a faded object is not in the working set.
The Refedit toolbar is displayed when a reference is being edited in place. The name of the selected reference is displayed in the toolbar. The editing buttons on the toolbar (Add Objects to the Working Set, Remove Objects from the Working Set, Discard Changes to Reference, and Save Back Changes to Reference) are active only during in-place reference editing. The Edit Block or Xref button is active whenever the toolbar is initiated and a reference editing session is not already in progress within the current drawing. The Refedit toolbar is dismissed automatically after changes made to the reference are saved back or discarded.