Area Type Options: Options Text Flow: Auto Size is greyed out

If you are using Adobe Illustrator (29.1) and the 'Auto Size' feature under Area Type Options is disabled, I suggest exiting the options window and using the 'Vertical Alignment' tool in the Properties or Control panel to align the selected text to the top of the frame. From there, try accessing the Area Type Options and check if the 'Auto Size' feature is available.

To test out Monika's theory that this is not a rectangle, why not select and copy the text from the existing shape, draw a rectangle with the Type tool and paste the text?

Is the resize option now available?

Please show a screenshot of your text object and the issue.