That error is a classic. You've got a beautifully layered PSD, you hit import, and After Effects just shrugs with a generic 'Photoshop file format error.' Annoying, right? Let's fix it fast.
The quick fix that works 90% of the time
Open your PSD in Photoshop, then go to File > Save a Copy (or Save As in older versions). Choose PSD again, but uncheck Maximize Compatibility if it's checked, or check it if it's unchecked. Then try importing that new file.
Wait, that sounds stupid. But here's what's happening: After Effects reads PSDs through a specific parser that expects certain layer structure and metadata. When Photoshop writes a PSD with certain advanced features—like smart objects with non-raster content, or layer comps with certain effects—the file can have a structure that AE's importer trips over. Forcing Photoshop to rewrite the file often normalizes that structure.
If that doesn't work, the nuclear option: flatten the PSD (Layer > Flatten Image) and save as a new PSD. You'll lose layers, but at least you'll have an importable file. For most people, that's fine because they only needed the composite.
Why the error actually happens
After Effects doesn't use Photoshop's own code to read PSDs—it has its own parser. That parser expects a specific order of blocks and a specific set of layer records. When Photoshop saves with hidden layer metadata, or with any non-standard blend mode, the parser hits something it can't interpret and throws that generic error. It's not a corruption issue; it's a compatibility gap.
Another common culprit: color mode. If your PSD is in Lab mode or Duotone, After Effects flatly refuses. It only supports RGB, CMYK, and Grayscale. If you've got a Lab-color PSD, convert to RGB (Image > Mode > RGB Color) and save. That alone can fix it.
Smart Objects are a frequent trigger
When you place a smart object into a PSD, the smart object's data is embedded as a separate layer with its own file structure. After Effects often can't parse that nested structure. If you've got smart objects, rasterize them before saving: right-click the layer and choose Rasterize Layer.
Less common variations of the same issue
Sometimes the error only appears when you import as a composition, but the file imports fine when you import as footage. If that's the case, the problem is usually in a layer effect. AE's composition importer tries to convert certain effects (like Color Overlay or Gradient Overlay) into After Effects effects, and if it can't map them, it fails. Look for layers with:
- Layer styles with Contour or Texture settings—these are poorly translated.
- Adjustment layers with a mask that has a feather of 100+ pixels—known to break the importer.
- Groups with pass-through blend mode set to something weird like 'Color Burn' on a nested group.
If you suspect those, flatten those specific layers or remove the styles.
Another variant: the error appears only when importing via the File > Import > File dialog, but drag-and-drop works fine. That suggests a path issue—like the PSD being on a network drive or a path with non-ASCII characters (e.g., the filename has emojis or accents). Copy the file to your local drive, rename it to something plain (no special characters), and try again.
And there's the version mismatch trap. If you're on After Effects 2023 but the PSD was saved by Photoshop CC 2025 with a newer format version, AE might choke. Photoshop's 'Save a Copy' dialog has a Format option—you can pick PSD (Large Document Format) or older versions under Compatibility Options.
Prevention
The real fix is to avoid the problem. When you're building a PSD specifically for After Effects, follow these rules:
- Keep it RGB. CMYK can work but often causes slight color shifts and occasional import weirdness. RGB is safe.
- Name your layers clearly—not for AE's sake, but for yours, because when it fails, you'll want to know which layer to blame.
- Don't use smart objects unless necessary. If you do, rasterize them before saving for AE.
- Turn off 'Maximize Compatibility' if you always work locally. That option adds a merged composite for older versions, which AE doesn't use, but it can bloat the file.
- Use 'Save a Copy' every time you're finishing a file for AE, so you keep your original intact with all the layers.
If you're a motion designer who gets PSDs from others, ask for flattenable layers and RGB mode. Most of the time, the sender has no idea they've created a file that AE can't read.
That's it. Try the re-save trick first, then check color mode and smart objects, and you'll rarely see this error again.