To begin with, you'll need a shape. Create a shape of your choice using the Shape Tool (u) or the Pen Tool (u). If you're using the Shape Tool, make sure that you're not using the Fill pixels option.

Changed cursor when inside the path

A vector shape created with the pen tool

Changed cursor when inside the path

A vector shape created with the pen tool

In the Layers palette, make sure that the thumbnail for the shape layer's mask is selected, as shown above. Next, select the Text Tool (T) and move your cursor inside the shape. The cursor will change to an I-beam with a dotted ellipse around it, as shown in the example on the left.

Click once—a text area will appear. Any text you now type will automatically word-wrap within your shape, as shown in the example on the right.

That's all well and good, but what if you want to alter the shape later? Your first instinct might be to adjust the shape layer, but if you try this you'll soon find

Adding text that flows within the shape

out that the text doesn't adjust to accommodate the new shape. This is because the text and the shape are independent of each other. Look in the Layers palette, and you'll see that the text has created its own layer, and the original shape layer remains untouched (see the example below). How do you adjust the shape of your text, then? Let me show you the path!

Adjusting the text path

If you select the text layer from the Layers palette, then view the Paths palette, you'll see your shape there. The path is what's causing your text to word-wrap.

You can adjust the shape of the path using the Direct Selection Tool (4). In the example shown here, I've adjusted the path so that the resulting shape is a bit wider than my original vector shape.

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