I attempted to paste a vector and/or image file on Photoshop as a smart object, when editing the image, it does not update on Illustrator. Is there a way around this?
Photoshop smart objects do not update external Illustrator files.
When one pastes... Photoshop embeds the vector data and creates a separate internal file for vector smart objects which has no connection to any external file. If you double-click a vector smart object and edit it, you are not editing the original Illustrator file. Note the title of the tab/window in Illustrator when editing...
It is not any .ai file you may have originally copied content from.
If you wish to use an external file from Illustrator, and have the photoshop file update when the Illustrator file changes, use
File > Place > Linked in Photoshop rather than copy/pasting.