How do I paste non-ASCII characters into vim?

Question

My terminal emulator is configured for Unicode character encoding and my .vimrc contains the line

set encoding=utf-8

but when I try pasting the word "café" into vim, it comes out as "café".

I can make an "é" in vim by typing Ctrl-vu followed by the 4-character code point (00e9) but I'd like the ability to paste it in.

Answer 1

The solution was to uncheck the "Escape non-ASCII input" checkbox in the Advanced tab of the Terminal.app settings.