Edit Smart Object

This command lets you edit the contents of a smart object created with the Convert to Smart Object, Place as Smart Object, or Open as Smart Object commands*.

*Unfortunately, the command doesn't let us edit smart objects, created in full Photoshop. A workaround for editing such objects is described here.

1. Select a smart object in the Layers panel.
2. Double-click the "Edit Smart Object" thumbnail in the Effects panel (fig. 1).

1. 

2. The smart object opens as an ordinary document (on the screenshot - "smart_object.psd"). Edit it as needed.
3. Save the edited smart object (File > Save) - the source smart object in the original document updates immediately (fig. 2).
Important! Do not alter the default saving directory and file name suggested by Photoshop Elements - otherwise, the changes won't take place in the source document.