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There are two ceilings, because there are two ways a template gets in. Most templates never approach either. A file in the hundreds of megabytes is usually carrying layers no render addresses, so removing them is often quicker than changing route.

What the rejection looks like

A file over the ceiling is refused with 400 and the error code PSD_TOO_LARGE. Its details object carries file_size_mb and max_size_mb, so the response names both numbers and you never have to work out which one you hit. The shape of every error response is on Errors. Pixel dimensions are a separate ceiling, 10000 by 10000, answered with DIMENSION_TOO_LARGE. A file can clear one and fail the other.

When a template is over the limit

1

Send it over the API instead of the dashboard.

The dashboard reads the bytes from your disk and caps each file at 300 MB. The API fetches the file from an address you give it, where the ceiling is Adobe’s own. Publish the file somewhere it can be downloaded and send that address as psd_file_url. Upload a PSD covers the call.
2

Upload in the background.

Set is_async to true and the call answers 202 with a job to poll, instead of holding the connection open while a large file is read.
3

Serve the file inside the fetch window.

The file is fetched with a 300 second timeout, so the address has to be directly downloadable. A share page that redirects through a viewer is the usual reason a large file never arrives.
4

Flatten what no render addresses.

Every layer you never target is weight the upload carries and the render ignores. Flattening those layers makes the upload faster and changes nothing about the result. The full checklist is on Preparing a PSD.

A smaller file pays twice

The file is read once per template rather than once per render, so the saving lands on the upload and then stays. Author smart object contents at 3000 px or larger and flatten the scenery around them, and you keep both: the design areas hold their resolution, and the decoration stops costing anything. Preparing a PSD suggests staying under 100 MB where you can, which is comfortable room on either route.

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