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 in 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 restored to the reference when the changes are saved back.
If you select a reference to edit in-place, the Reference Editor visor is displayed. The buttons on the visor (Add to Working Set, Remove from Working Set, Discard Changes, and Save) are active only during in-place reference editing. The visor is dismissed automatically after changes made to the reference are saved back or discarded.