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I have a census block shapefile and I want to separate the data according to their towns or village. The towns/village is a separate shapefile. Any help is greatly appreciated. I am using ArcInfo 10.

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So you have population data in the census block, and want to pull that into the town/village shapes, correct? – Erica Mar 31 '13 at 23:17
Please edit your question to clarify its ambiguities. What should the output be--a set of separate shapefiles or a new attribute in the shapefile? What does "according to" mean? Intersection with? Proximity to? Something else? – whuber Jun 25 '13 at 13:48

at any license level use Split Layer by Attributes ensuring the source file is a shapefile and the destination is a folder

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I am assuming that your towns/villages are available as polygon outlines (and not just point features).

With an ArcInfo license you should be able to use Split.

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