Select reference

Select an xref or block in the current drawing.

Select Nesting Level

OK

Accepts the currently highlighted reference for in-place reference editing.

If you are editing a block reference with attributes, you can enter y to display the attribute definitions and make them available for editing. The attributes
are made invisible, and the attribute definitions are available for editing along
with the selected reference geometry. When changes are saved back to the block reference,
the attributes of the original reference remain unchanged. The new or altered attribute
definitions affect only subsequent insertions of the block; the attributes in existing
block instances are not affected.

• All.Objects in the selected reference will be automatically included in the reference
  editing session.
• Nested.After you close the Reference Edit dialog box and enter the reference edit state,
  you are prompted to select the specific objects in the reference that you want to
  edit.

Next

Advances through the reference and nested references available for selection. The
currently selected reference is highlighted.A working set is formed with the objects you have selected for editing. The working
set includes objects that can be saved back to update the xref or block definition.
When you save back changes, changes made to the objects in the reference file are
saved without actually opening the reference drawing or recreating the block. The
working set is visually distinct from the rest of the current drawing: all objects
in the current drawing, except objects in the working set, appear faded. The XFADECTL
system variable controls the fading of objects while you edit a reference in place.You can select objects in xrefs for editing even if they are on a locked layer in
the reference file. When a reference object is part of the working set, you can unlock
the object’s layer and make changes to the object. Only the changes made to the object
are saved back to the reference file; the xref layer remains locked in the reference
file.

NOTE: Objects outside of the working set are not faded unless the visual style is set to
2D Wireframe during in-place reference editing.