How to replace "\n" string with a new line in Unix Bash script

No need for sed, using parameter expansion:

$ foo='1\n2\n3'; echo "${foo//'\n'/$'\n'}"  123

With bash 4.4 or newer, you can use the E operator in ${parameter@operator}:

$ foo='1\n2\n3'; echo "${foo@E}"123

Other answers contain alternative solutions. (I especially like the parameter expansion one.)

Here's what's wrong with your attempt:

In

echo $EXT_DESCR | sed 's/\\n/\n/g'

the sed command is in single quotes, so sed gets s/\\n/\n/g as is.

In

NEW_DESCR=`echo $EXT_DESCR | sed 's/\\n/\n/g'`

the whole command is in backticks, so a round of backslash processing is applied. That leads to sed getting the code s/\n/\n/g, which does nothing.

A possible fix for this code:

NEW_DESCR=`echo $EXT_DESCR | sed 's/\\\\n/\\n/g'`

By doubling up the backslashes, we end up with the right command in sed.

Or (easier):

NEW_DESCR=$(echo $EXT_DESCR | sed 's/\\n/\n/g')

Instead of backticks use $( ), which has less esoteric escaping rules.

Note: Don't use ALL_UPPERCASE for your shell variables. UPPERCASE is (informally) reserved for system variables such as HOME and special built-in variables such as IFS or RANDOM.

This printf would do the job by interpreting all escaped constructs:

printf -v NEW_DESCR "%b" "$EXT_DESCR"

-v option will store output in a variable so no need to use command substitution here.

Problem with your approach is use of old back-ticks. You could do:

NEW_DESCR=$(echo "$EXT_DESCR" | sed 's/\\n/\n/g')

Assuming you're using gnu sed as BSD sed won't work with this approach.