1) Create a New new 300X300 file in RGB color Mode, and choose contents as transparent.

2) Fill the canvas with the desired background color (Edit » Fill).

3) Turn on the Rulers & Gudes. (Choose View > Show Rulers, & View > Snap to Guides).

4) Drag a vertical and horizontal guide into the center of the canvas.

6) Rotate the text by selecting Image > Rotate Canvas >180º.This step is required in order to end up with text which reads across the top of our circle : however, you may skip this step if you want your text to read around the bottom. See Fig 6

7) Increase the text height to approximately twice its default height by using Free Transform. (Choose Edit > Free Transform and drag the border down and press enter.) If you omit this step and apply the Polar filter, the text will be disproportioned .See Fig 7

8) Now apply Filter > Distort > Polar Coordinates using the Rectangular to Polar option. When prompted about rendering the text layer, click OK .

If you want you can change the position of the text circle by using move tool.

9)Rotate the image right-side-up again by Selecting Image > Rotate Canvas > 180º.

In this fig the text ring is not a complete circle. By changing the text size You can make a complete text ring. See Fig 8