How To: Mask line features by their labels in ArcMap
The following procedure provides functionality similar to the ARCTEXT command with the BLANK option in Workstation ArcInfo. Resulting lines are labeled such that the label is placed on the top of the line, as well as masking part of the line underneath. This technique is commonly used to label contour lines.
This functionality is only available with an ArcInfo license. Annotation must be stored in a Geodatabase for this procedure to work.
If the line dataset is not a feature class in a geodatabase, start ArcCatalog and create a new geodatabase containing a new feature dataset. Use the import button to import the coordinate system and the X/Y domain from the line dataset to the feature dataset.
Add the line dataset into ArcMap and display at desired scale.
Label features with desired symbology and label settings.
In ArcMap, right-click the line dataset and select 'Convert labels to annotation'. Use the option to store annotation in database. Use the file icon next to the annotation feature class name to browse to the feature dataset to add the annotation feature class to.
Open ArcToolbox in ArcMap and use Cartography Tools > Masking Tools > Intersect Layers Masks tool. Use the annotation feature class as the Masking Layer, and the line dataset as the Masked Layer.
The new feature class is added automatically to ArcMap.
Set the Fill symbol of this layer to NoColor, with an outline width of 0.
Right-click Layers in the Table of Contents, then select Advanced Drawing Options.
Check 'Draw using masking options specified below'.
Check the line dataset layer, click Ok and the lines display as masked.