arcgis cut polygon with another polygon

1. Start an edit session from the Editor toolbar.
2. Using the edit tool, select the overlaying polygon.
3. Click the Editor dropdown and select 'Clip'.
4. Leave the 'buffer distance' set to 0.00.
5. Under 'When Clipping Features', select 'Discard the area that intersects' and then click OK.
6. Delete or move the overlaying polygon. The underlying polygon has the overlaying polygon area clipped from the feature

http://support.esri.com/en/knowledgebase/techarticles/detail/30403