diff --git a/notebook/static/base/js/dialog.js b/notebook/static/base/js/dialog.js
index 02c113597..8492c431c 100644
--- a/notebook/static/base/js/dialog.js
+++ b/notebook/static/base/js/dialog.js
@@ -80,6 +80,9 @@ define(function(require) {
                 .addClass("btn btn-default btn-sm")
                 .attr("data-dismiss", "modal")
                 .text(label);
+            if (btn_opts.id) {
+                button.attr('id', btn_opts.id);
+            }
             if (btn_opts.click) {
                 button.click($.proxy(btn_opts.click, dialog_content));
             }
@@ -269,12 +272,58 @@ define(function(require) {
         modal_obj.on('shown.bs.modal', function(){ editor.refresh(); });
     };
 
+    var insert_image = function (options) {
+        var message =
+            "Select a file to insert.";
+        var file_input = $('<input/>')
+            .attr('type', 'file')
+            .attr('accept', 'image/*')
+            .attr('name', 'file')
+            .on('change', function(file) {
+                var $btn = $(modal_obj).find('#btn_ok');
+                if (this.files.length > 0) {
+                    $btn.removeClass('disabled');
+                } else {
+                    $btn.addClass('disabled');
+                }
+            });
+        var dialogform = $('<div/>').attr('title', 'Edit attachments')
+            .append(
+                $('<form/>').append(
+                    $('<fieldset/>').append(
+                        $('<label/>')
+                        .attr('for','file')
+                        .text(message)
+                        )
+                        .append($('<br/>'))
+                        .append(file_input)
+                    )
+            );
+        var modal_obj = modal({
+            title: "Pick a file",
+            body: dialogform,
+            buttons: {
+                OK: {
+                    id : 'btn_ok',
+                    class : "btn-primary disabled",
+                    click: function() {
+                        options.callback(file_input[0].files[0]);
+                    }
+                },
+                Cancel: {}
+            },
+            notebook: options.notebook,
+            keyboard_manager: options.keyboard_manager,
+        });
+    };
+
     
     var dialog = {
         modal : modal,
         kernel_modal : kernel_modal,
         edit_metadata : edit_metadata,
-        edit_attachments : edit_attachments
+        edit_attachments : edit_attachments,
+        insert_image : insert_image
     };
 
     return dialog;
diff --git a/notebook/static/notebook/js/actions.js b/notebook/static/notebook/js/actions.js
index 152b6fbfc..682c8d0da 100644
--- a/notebook/static/notebook/js/actions.js
+++ b/notebook/static/notebook/js/actions.js
@@ -153,6 +153,13 @@ define(function(require){
                 env.notebook.command_mode();
             }
         },
+        'insert-image': {
+            help      : 'insert image',
+            help_index : 'dz',
+            handler : function (env) {
+                env.notebook.insert_image();
+            }
+        },
         'split-cell-at-cursor': {
             help    : 'split cell',
             help_index : 'ea',
diff --git a/notebook/static/notebook/js/menubar.js b/notebook/static/notebook/js/menubar.js
index 32ca35238..94912c943 100644
--- a/notebook/static/notebook/js/menubar.js
+++ b/notebook/static/notebook/js/menubar.js
@@ -228,6 +228,7 @@ define([
             '#toggle_all_output': 'toggle-all-cells-output-collapsed',
             '#toggle_all_output_scroll': 'toggle-all-cells-output-scrolled',
             '#clear_all_output': 'clear-all-cells-output',
+            '#insert_image': 'insert-image',
         };
 
         for(var idx in id_actions_dict){
diff --git a/notebook/static/notebook/js/notebook.js b/notebook/static/notebook/js/notebook.js
index a37e83e11..1c0d80d4a 100644
--- a/notebook/static/notebook/js/notebook.js
+++ b/notebook/static/notebook/js/notebook.js
@@ -1673,6 +1673,46 @@ define(function (require) {
         this.merge_cells([index, index+1], false);
     };
 
+    // Image insertion
+
+    /**
+     * Shows a dialog letting the user pick an image from her computer and
+     * insert it into the edited markdown cell
+     */
+    Notebook.prototype.insert_image = function () {
+        var that = this;
+        var cell = this.get_selected_cell();
+        // The following should not happen as the menu item is greyed out
+        // when those conditions are not fullfilled (see MarkdownCell
+        // unselect/select/unrender handlers)
+        if (cell.cell_type != 'markdown') {
+            console.log('Error: insert_image called on non-markdown cell');
+            return;
+        }
+        if (cell.rendered) {
+            console.log('Error: insert_image called on rendered cell');
+            return;
+        }
+        dialog.insert_image({
+            callback: function(file) {
+                cell.edit_mode();
+                cell.insert_inline_image_from_blob(file);
+            },
+            notebook: this,
+            keyboard_manager: this.keyboard_manager
+        });
+    };
+
+    /**
+     * Enable/disable the "Insert image" menu item
+     */
+    Notebook.prototype.set_insert_image_enabled = function(enabled) {
+        if (enabled) {
+            $('#insert_image').removeClass('disabled');
+        } else {
+            $('#insert_image').addClass('disabled');
+        }
+    };
 
     // Cell collapsing and output clearing
 
diff --git a/notebook/static/notebook/js/textcell.js b/notebook/static/notebook/js/textcell.js
index 351fb7855..516c8d4ae 100644
--- a/notebook/static/notebook/js/textcell.js
+++ b/notebook/static/notebook/js/textcell.js
@@ -51,6 +51,7 @@ define([
         this.notebook = options.notebook;
         this.events = options.events;
         this.config = options.config;
+        this.notebook = options.notebook;
         
         // we cannot put this as a class key as it has handle to "this".
         var config = utils.mergeopt(TextCell, this.config);
@@ -256,6 +257,24 @@ define([
         }
     };
 
+    MarkdownCell.prototype.unselect = function () {
+        var cont = TextCell.prototype.unselect.apply(this);
+        this.notebook.set_insert_image_enabled(false);
+    };
+
+    MarkdownCell.prototype.select = function () {
+        var cont = TextCell.prototype.select.apply(this);
+        if (cont) {
+            this.notebook.set_insert_image_enabled(!this.rendered);
+        }
+    };
+
+    MarkdownCell.prototype.unrender = function () {
+        var cont = TextCell.prototype.unrender.apply(this);
+        this.notebook.set_insert_image_enabled(true);
+    };
+
+
     // TODO(julienr): Move to cell if the attachments is accepted as a cell
     // attribute (not markdown specific)
     MarkdownCell.prototype.add_attachment = function (key, mime_type, b64_data) {
diff --git a/notebook/templates/notebook.html b/notebook/templates/notebook.html
index 31fd510f6..efa614b2c 100644
--- a/notebook/templates/notebook.html
+++ b/notebook/templates/notebook.html
@@ -143,6 +143,8 @@ data-notebook-path="{{notebook_path | urlencode}}"
                         <li id="edit_nb_metadata"><a href="#">Edit Notebook Metadata</a></li>
                         <li class="divider"></li>
                         <li id="find_and_replace"><a href="#"> Find and Replace </a></li>
+                        <li class="divider"></li>
+                        <li id="insert_image" class="disabled"><a href="#"> Insert Image </a></li>
                     </ul>
                 </li>
                 <li class="dropdown"><a href="#" class="dropdown-toggle" data-toggle="dropdown">View</a>