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To use the REPLACE function in Excel, type `=REPLACE(` and open parentheses. Enter the cell reference for the text you want to modify, such as C3, followed by a comma. Next, specify the start position of the text to replace; for example, the third character is indicated by entering the number 3. Then, state how many characters you want to replace, followed by another comma. After that, in quotation marks, input the new text for replacement. Close the quotation marks and parentheses, then press Enter or Return. Finally, use the autofill function to apply the change to adjacent cells.