Use these tools to create and update XRef records.
Create XRef Record from File - Launches an Open File dialog so you can select the source file for your XRef record. When you a select a file, the XRef Merge dialog appears.
Any transform animation assigned to the source objects can be merged along with the XRef object, but it will not be updated with the source object.
Note: If you want to maintain externally referenced transforms, materials, and manipulators, make sure Merge Transforms, Merge Materials, and Merge Manipulators in the XRef Objects dialog are off before you click Create XRef Record from File. 
Remove XRef Record - Deletes the highlighted XRef record(s) after you confirm the action. All entities associated with the highlighted record(s) are removed from the scene. Note: Once you have removed an XRef record, you cannot undo this action.
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Combine XRef Records - Click to combine the contents of more than one XRef record from the same source file into one record. This is useful when you want to clean up the organization of your XRef records. Rather than having multiple records of the same file, you can group all of the objects, controllers, and materials from that file under the same record. This button is available only when you highlight two records that refer to the same file name and path; both records must have identical settings. XRef records must refer to the same file with the same XRef entities. Combine XRef Records only allows you to consolidate all of the entities of one file into one XRef record entry. It does not allow you to combine the contents of different files, even if the files have the same name. Note: Nested externally referenced records cannot be combined.
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Update - Refreshes the contents of the selected XRef record. If the objects, controllers, materials, or manipulators referenced have changed in the source scene, you will see these changes in your master scene. Note: The changes must be saved in the source file before you see them in the master file. If you remove externally referenced entities from the master file using the Delete XRef Entity button, these entities will not be externally referenced when you update the XRef record, even though they continue to exist in the source scene.Note: Reloading XRef items works correctly even when an object in the source scene has been renamed, or deleted and then re-created with the exact same name, including character case. However, if the source scene contains several nodes with the same name, an XRef item corresponding to a node whose name is not unique in the source scene might not necessarily resolve as you expect during the update process. For best results, maintain unique names for all nodes in the source scene.Warning: If you update an XRef in a scene with radiosity, probably this will invalidate the radiosity solution. After you update the XRef, reset the radiosity solution and then recalculate it.
Merge In Scene - Converts all XRef entities of the highlighted record into native (local) entities in your master scene. The objects, controllers, materials, and manipulators are no longer referenced from the source file but become part of your master scene. A prompt appears so you can confirm the action. Since a merged XRef entity becomes part of the scene and is no longer an XRef entity, its name is removed from the XRef Entities list. This works on a XRef record basis, so all entities belonging to the highlighted XRef record are converted. The contents of the source file are not affected by this button.
Merging an XRef object loads the full modifier stack of the source object into the master scene (your current scene), while maintaining any additional stack items that were added while the object was an external reference. Thus, you can use Merge In Scene to update an object that has been modified as an external reference. Similarly, merging an XRef controller into the master scene maintains any offset transformation you might have applied to the controller in the master scene.
Convert Selected Object(s) to XRefs - Creates a source file for currently selected objects. This means that you can select objects in the current scene, including their transform controllers and materials, and then save them to a separate scene file. This file is then listed as an XRef record that contains the entities you selected. Note: This option can be used on both—native (local) objects or externally referenced objects. If you use it for an object that is already an XRef object, it creates a nested XRef. Nested XRefs still behave as you expect, but they can reduce performance when you open a scene or render it.
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Select - Selects all entities that belong to the currently highlighted XRef record or records. To add highlighted records’ entities to the selection, hold Ctrl while clicking Select. To remove highlighted records’ entities from the selection, hold Alt while clicking Select.
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Select by Name - Opens Select Objects dialog that lists all objects and highlights those belonging to the currently highlighted XRef record, as well as objects selected in the scene. Use this dialog to select XRef objects.
Highlight Selected Objects' XRef Records - Based on the objects selected in the scene, the corresponding records that contain these objects are highlighted in the XRef Objects dialog.