A method for cutting and edge sealing cells of cellular retroreflective sheeting is disclosed using a specially designed apparatus and tool. Sheeting having a thickness T is heated to a thermoforming temperature to form a heated sheeting. Pressing the unheated tool, the heated sheeting, and a substrate together results in cutting and edge sealing of the heated sheeting. The tool has a radiused ridge for cutting and edge sealing with the shape of the ridge similar to the shape desired for the edge seal. A height H of the ridge is defined relative to the thickness of the sheeting. The fraction of the ridge height to the thickness of the sheeting is less than one and more than 0.2. The tools may be mounted on a perimeter of a wheel for continuously slitting and edge sealing strips of cellular sheeting. The retroreflectivity of the sheeting is maximized by (1) minimizing the width of the sealed edges while (2) maximizing the number of closed cells along the sealed edges that can withstand a water holdout test.