。
She wrapped the gift in paper.
Literal
She [topic-は] giving thing [object-を] paper [with-で] wrapped.
贈るもの ('thing to give / something one is going to give') uses the verb 贈る ('give as a gift, present') in attributive position to modify もの ('thing'). で here marks the paper as the wrapping material — the means by which the gift gets wrapped. The alternative phrasing 贈り物を紙に包む uses に instead, framing the paper as the destination the gift goes into rather than the tool used to do the wrapping; both are natural Japanese, with the choice tracking which side of the action is being foregrounded.