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Gmail recently released a new UI for compose. How do you manually quote a paragraph? The block-quote button seems to have disappeared from the formatting toolbar in the rich text compose editor.
The quote button is inside the More formatting options menu on the formatting toolbar. When you click the arrow, a submenu pops up with a few more options, depending on the width of your window.
To quote, you can also select the text and use the keyboard shortcut Ctrl+Shift+9 on Windows and Cmd+Shift+9 on OS X.
This shortcut works only in rich text mode.