The interoperability improvement is for Photoshop users who use Illustrator in their workflows and want an improved experience when copying-pasting their content from Illustrator to Photoshop.

The Paste As > Layers option is the new addition to the Illustrator-Photoshop interoperability workflows along with the existing options of Smart Object, Pixels, Path, and Shape Layer. This new option supports the import of Illustrator layers while maintaining their visual and functional efficacy and layer structure. 

When copying objects from Illustrator and pasting them into Photoshop, each object will be in its own layer, mostly editable,  and retain as many properties as possible.

With the ability to copy an object from Illustrator and paste in Photoshop, you get so many advantages.

You can import Illustrator layers into Photoshop and continue to work on them, all the while maintaining the same visual and functional standards. You also get to retain the same layer structure in Photoshop as done in Illustrator!

How to initiate an interop workflow from Illustrator to Photoshop

Interop scenarios and limitations while copy-pasting

Interoperability enhancements

Introduced in the April 2022 release (version 23.3)

Type Objects

You can bring point text, area text, and on-path text objects created in Illustrator to Photoshop as live editable text layers. Once pasted in Photoshop, you can edit various properties of text layers, such as text color, size, font, alignment, etc. using the Properties Panel.

Introduced in the October 2021 release (version 23.0)

Vector Shapes

Bring in Photoshop-supported shapes, such as Rectangle, Ellipse, Polygon, and Line, from Illustrator as live shape layers. Conversely, the Star shape, not available in Photoshop, is imported as a path.

You can also import colors in shape fill from Illustrator to Photoshop as live shape layers. Plus, you can retain the layer name as is when importing from Illustrator to Photoshop.

Vector Paths

You can bring in Paths and Compound Paths from Illustrator to Photoshop as non-live shape layers with the look and feel retained as is. You can also edit their properties in the Properties tab, like changing the color and shape of the path and strokes, as well as modifying the anchor points for changing the path.

Clipping Masks 

Clipping masks created in Illustrator are mapped as vector masks or rasterized when importing to Photoshop. When pasting clipping masks, Photoshop users will be prompted to select their choice of pasting - as vector mask or rasterize.  

When importing into Photoshop, a group will be created corresponding to the clip group in Illustrator and a vector mask will be applied to this group corresponding to the clipping path from Illustrator. This ensures visual and functional fidelity from Illustrator are maintained as the group's descendants will clip to the vector mask in Photoshop.

When created on unsupported objects, or objects with unsupported properties, the clipping masks will be rasterized to maintain the same visual effect in Photoshop. 

Other Enhancements

All embedded and linked artwork created in Illustrator will open in Photoshop. However, Illustrator objects such as symbols, charts, mesh, and repeat will be rasterized when pasted in Photoshop.