diff --git a/configs/sim/include/README.txt b/configs/sim/include/README.txt
index ff49621e16..dac6bedbcf 100644
--- a/configs/sim/include/README.txt
+++ b/configs/sim/include/README.txt
@@ -1,6 +1,8 @@
 README
 ======
 
+  Overview
+  --------
   This directory contains logic to support a custom ROMFS start-up script.
   This startup script is used by by the NSH when it starts provided that
   CONFIG_NSH_ARCHROMFS=y.  The script provides a ROMFS volue that will be
@@ -29,7 +31,9 @@ README
   the key or the password word will require regeneration of the nsh_romfimg.h
   header file.
 
-  The content on the nsh_romfsimg.h header file as generated from a sample
+  Updating the ROMFS File System
+  ------------------------------
+  The content on the nsh_romfsimg.h header file is generated from a sample
   directory structure.  That directory structure is contained in the binary
   file etc.tar.gz and can be modified per the following steps:
 
@@ -57,3 +61,49 @@ README
 
   See the sim/nsh configuration for an example of the use of this file
   system.
+
+  Replacing the Password File
+  ---------------------------
+  The sim/nsh configuration can also be used to create a new password file.
+  First, make these configuration changes:
+
+    1. Disable logins
+
+       - CONFIG_NSH_CONSOLE_LOGIN=y
+       + # CONFIG_NSH_CONSOLE_LOGIN is not set
+         # CONFIG_NSH_TELNET_LOGIN is not set
+
+    2. Move the password file to a write-able file system:
+
+       - CONFIG_FSUTILS_PASSWD_PATH="/etc/passwd"
+       + CONFIG_FSUTILS_PASSWD_PATH="/tmp/passwd"
+
+    3. make the password file modifiable
+
+       - CONFIG_FSUTILS_PASSWD_READONLY=y
+       # CONFIG_FSUTILS_PASSWD_READONLY is not set
+
+  Now rebuild the simulation.  No login should be required to enter the
+  shell and you should find the 'useradd', 'userdel', and 'passwd' commands
+  available in the help summary.
+
+  Use the NSH 'useradd' command to add new uses with new user passwords like:
+
+    nsh> useradd <username> <password>
+
+  Do this as many times as you would like.  Each time that you do this a new
+  entry with an encrypted password will be added to the passwd file at
+  /tmp/passwd.  You can see the passwd file like:
+
+    nsh> cat /tmp/passwd
+
+  When you are finished, you can simply copy the /tmp/passwd content from the
+  'cat' command and paste it into an editor.  Make sure to remove any
+  carriage returns that may have ended up on the file if you are using
+  Windows.
+
+  Then recreate the nsh_romfsimg.h file as described above.  In step 2,
+  simply replace the old /etc/passwd file with the one in your editor.
+  When you are finished, the new passwd file will be in the ROMFS file
+  system at the path /etc/passwd.  When you restore the original NSH
+  sim configuration, these are the passwords that will be used.