XAML is a new language used to develop software that targets Windows Vista driven applications. .NET 3.0 and 3.5 introduces XAML as a new programming language for WPF and Silverlight development.
Some companies/induviduals have already taken initiative to build tools for XAML.
Visual Studio 2008
Visual Studio 2008 is one of the the best XAML editor you can use. It also supports intellisense and code behind code editor. Visual Studio 2008 has several versions and the best part is, Visual Studio 2008 Express version is available free.
Microsoft Expression Blend and Expression Tools
Microsoft Expression Studio takes your creative possibilities to a new level. The professional design tools and innovative technologies in Expression Studio give you the flexibility and freedom to bring your vision to reality—whether you are designing standards-based Web sites, rich user experiences for the desktop and Silverlight, or managing digital assets and content.
You may find more details on Expression tools here: http://www.microsoft.com/expression/
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Here are some non Microsoft companies.
ZAM 3D XAML Tool
Electric Rain ZAM 3Dâ„¢ is a full-featured 3D modeling application that enables easy creation, customization and animation of 3D interface elements for WPF based applications. Once a 3D scene is created, ZAM 3D automatically generates the XAML (eXtensible Application Markup Language) markup necessary to convert the 3D elements into an WPF 3D scene. XAML files created with ZAM 3D can be directly integrated into your application development environment to create rich and engaging user experiences never before possible. Visit http://www.erain.com/products/zam3d/ for more details.
Xamlon Pro and XAMLConverter
Xamlon Pro and XAMLConverter are developed by Xamlon Inc. a La Jolla, CA based compny support development of Xamlon and Avalon. Xamlon supports XAML and Avalon based development. XAMLConverter is a very simple but powerful tool for converting other file formats to XAML. See more details about Xamlon: http://www.xamlon.com/
MyXaml
Welcome to MyXaml - the most extensive open source XAML effort on the planet. MyXaml offers developers declarative markup capabilities to your .NET 1.1 and 2.0, and ASP.NET applications using a markup language called XAML (pronounced as "Zamel"). This new technology will give developers and end users alike the ability to use an XML-based approach to dynamically define and use the application's interface. Visit http://www.myxaml.com/ for more details.
Mobiform Aurora XAML Editor
Mobiform Aurora XAML Editor (Beta) Aurora is a graphical designer developed to create and edit Avalon Windows, elements, and controls. Aurora is built on top of Avalon and renders using the Avalon API. Aurora is designed for use with the November 2004 Avalon Technology Preview Community for Windows XP (CTP). Visit http://www.mobiform.com/2005/XAML/xamlhome.htm for more details.
EmfToXaml
EmfToXaml is an Emf to Wmf converter. EMF is the format used by Office Cliparts, XAML, is the XML format uses by Avalon, the next generation Windows Engine. You can view view the metafile records using a GUI, and analyze properties and frames to be converted into XAML. Visit http://lab.aspitalia.com/lab.aspx?ID=15#eng for more details.
XamlViewer
Visual Studio 2005 beta does not have any XAML designer. XamlViewer integrates with Visual Studio 2005 and let you design XAML and see the output right away. It's free. Check it out here: http://weblogs.asp.net/gmilano/archive/2004/11/24/269082.aspx
XamlPad
Chris Anderson's XamlPad.
http://www.simplegeek.com/PermaLink.aspx/f873638f-a3ec-4574-932d-d939b336ead2