diff --git a/src/frontends/qt4/GuiExternal.cpp b/src/frontends/qt4/GuiExternal.cpp
index 0c0f178ba1..49fbdeadb7 100644
--- a/src/frontends/qt4/GuiExternal.cpp
+++ b/src/frontends/qt4/GuiExternal.cpp
@@ -110,6 +110,8 @@ GuiExternal::GuiExternal(GuiView & lv)
 		this, SLOT(change_adaptor()));
 	connect(browsePB, SIGNAL(clicked()),
 		this, SLOT(browseClicked()));
+	connect(embedCB, SIGNAL(toggled(bool)),
+		this, SLOT(change_adaptor()));
 	connect(editPB, SIGNAL(clicked()),
 		this, SLOT(editClicked()));
 	connect(externalCO, SIGNAL(activated(QString)),
@@ -557,6 +559,7 @@ void GuiExternal::updateContents()
 	string const name =
 		params_.filename.outputFilename(bufferFilepath());
 	fileED->setText(toqstr(name));
+	embedCB->setCheckState(params_.filename.embedded() ? Qt::Checked : Qt::Unchecked);
 
 	externalCO->setCurrentIndex(getTemplateNumber(params_.templatename()));
 	updateTemplate();
@@ -639,6 +642,7 @@ void GuiExternal::updateTemplate()
 void GuiExternal::applyView()
 {
 	params_.filename.set(fromqstr(fileED->text()), bufferFilepath());
+	params_.filename.setEmbed(embedCB->checkState() == Qt::Checked);
 
 	params_.settemplate(getTemplate(externalCO->currentIndex()).lyxName);
 
diff --git a/src/insets/ExternalSupport.cpp b/src/insets/ExternalSupport.cpp
index 0ce66a42e7..0d2615883b 100644
--- a/src/insets/ExternalSupport.cpp
+++ b/src/insets/ExternalSupport.cpp
@@ -50,7 +50,7 @@ Template const * getTemplatePtr(InsetExternalParams const & params)
 
 void editExternal(InsetExternalParams const & params, Buffer const & buffer)
 {
-	formats.edit(buffer, params.filename,
+	formats.edit(buffer, params.filename.availableFile(),
 		     formats.getFormatFromFile(params.filename));
 }
 
@@ -254,7 +254,7 @@ void updateExternal(InsetExternalParams const & params,
 
 		if (from_checksum != temp_checksum) {
 			Mover const & mover = getMover(from_format);
-			if (!mover.copy(params.filename, temp_file)) {
+			if (!mover.copy(params.filename.availableFile(), temp_file)) {
 				LYXERR(Debug::EXTERNAL, "external::updateExternal. "
 					<< "Unable to copy " << params.filename << " to " << temp_file);
 				return; // FAILURE
@@ -310,7 +310,7 @@ void updateExternal(InsetExternalParams const & params,
 	ErrorList el;
 	bool const success =
 		theConverters().convert(&buffer, temp_file, abs_to_file,
-				   params.filename, from_format, to_format, el,
+				   params.filename.availableFile(), from_format, to_format, el,
 				   Converters::try_default | Converters::try_cache);
 
 	if (!success) {
diff --git a/src/insets/InsetExternal.cpp b/src/insets/InsetExternal.cpp
index 5e04597b3a..38801381fb 100644
--- a/src/insets/InsetExternal.cpp
+++ b/src/insets/InsetExternal.cpp
@@ -31,8 +31,11 @@
 #include "MetricsInfo.h"
 #include "OutputParams.h"
 
+#include "frontends/alert.h"
+
 #include "graphics/PreviewLoader.h"
 
+#include "support/ExceptionMessage.h"
 #include "support/filetools.h"
 #include "support/lstrings.h"
 #include "support/lyxlib.h"
@@ -59,6 +62,8 @@ string defaultTemplateName;
 
 namespace lyx {
 
+namespace Alert = frontend::Alert;
+
 extern bool use_gui;
 
 namespace external {
@@ -182,9 +187,10 @@ void InsetExternalParams::write(Buffer const & buffer, ostream & os) const
 	os << "External\n"
 	   << "\ttemplate " << templatename() << '\n';
 
-	if (!filename.empty())
+	if (!filename.empty()) {
 		os << "\tfilename " << filename.outputFilename(buffer.filePath()) << '\n';
-
+		os << "\tembed " << (filename.embedded() ? "true" : "false") << '\n';
+	}
 	if (display != defaultDisplayType)
 		os << "\tdisplay "
 		   << external::displayTranslator().find(display)
@@ -241,6 +247,7 @@ bool InsetExternalParams::read(Buffer const & buffer, Lexer & lex)
 	enum ExternalTags {
 		EX_TEMPLATE = 1,
 		EX_FILENAME,
+		EX_EMBED,
 		EX_DISPLAY,
 		EX_LYXSCALE,
 		EX_DRAFT,
@@ -264,6 +271,7 @@ bool InsetExternalParams::read(Buffer const & buffer, Lexer & lex)
 		{ "draft",           EX_DRAFT},
 		{ "extra",           EX_EXTRA },
 		{ "filename",        EX_FILENAME},
+		{ "embed",           EX_EMBED},
 		{ "height",          EX_HEIGHT },
 		{ "keepAspectRatio", EX_KEEPASPECTRATIO },
 		{ "lyxscale",        EX_LYXSCALE},
@@ -292,6 +300,12 @@ bool InsetExternalParams::read(Buffer const & buffer, Lexer & lex)
 			filename.set(name, buffer.filePath());
 			break;
 		}
+		
+		case EX_EMBED: {
+			lex.next();
+			filename.setEmbed(lex.getBool());
+			break;
+		}
 
 		case EX_DISPLAY: {
 			lex.next();
@@ -437,6 +451,15 @@ void InsetExternal::doDispatch(Cursor & cur, FuncRequest & cmd)
 		Buffer const & buffer = cur.buffer();
 		InsetExternalParams p;
 		InsetExternalMailer::string2params(to_utf8(cmd.argument()), buffer, p);
+		if (!p.filename.empty()) {
+			try {
+				p.filename.enable(buffer.embeddedFiles().enabled(), &buffer);
+			} catch (ExceptionMessage const & message) {
+				Alert::error(message.title_, message.details_);
+				// do not set parameter if an error happens
+				break;
+			}
+		}
 		setParams(p, buffer);
 		break;
 	}
@@ -476,8 +499,18 @@ bool InsetExternal::getStatus(Cursor & cur, FuncRequest const & cmd,
 void InsetExternal::registerEmbeddedFiles(Buffer const &,
 	EmbeddedFiles & files) const
 {
-	// temporarily disable embedding for this inset
-	/* files.registerFile(params_.filename, this); */
+	files.registerFile(params_.filename, this);
+}
+
+
+void InsetExternal::updateEmbeddedFile(Buffer const & buf,
+	EmbeddedFile const & file)
+{
+	// when embedding is enabled, change of embedding status leads to actions
+	EmbeddedFile temp = file;
+	temp.enable(buf.embeddedFiles().enabled(), &buf);
+	// this will not be set if an exception is thorwn in enable()
+	params_.filename = temp;
 }
 
 
@@ -532,7 +565,8 @@ graphics::Params get_grfx_params(InsetExternalParams const & eparams)
 {
 	graphics::Params gparams;
 
-	gparams.filename = eparams.filename;
+	gparams.filename = eparams.filename.availableFile();
+	gparams.icon = eparams.filename.embedded() ? "pin.png" : "";
 	gparams.scale = eparams.lyxscale;
 	if (eparams.clipdata.clip)
 		gparams.bb = eparams.clipdata.bbox;
@@ -671,8 +705,11 @@ void InsetExternal::write(Buffer const & buffer, ostream & os) const
 void InsetExternal::read(Buffer const & buffer, Lexer & lex)
 {
 	InsetExternalParams params;
-	if (params.read(buffer, lex))
+	if (params.read(buffer, lex)) {
+		// exception handling is not needed as long as embedded files are in place.
+		params.filename.enable(buffer.embeddedFiles().enabled(), & buffer);
 		setParams(params, buffer);
+	}
 }
 
 
diff --git a/src/insets/InsetExternal.h b/src/insets/InsetExternal.h
index 993354d328..533eeb92b9 100644
--- a/src/insets/InsetExternal.h
+++ b/src/insets/InsetExternal.h
@@ -80,7 +80,7 @@ public:
 	std::string const & templatename() const { return templatename_; }
 
 	/// The external file.
-	support::DocFileName filename;
+	EmbeddedFile filename;
 	/// How the inset is to be displayed by LyX.
 	external::DisplayType display;
 	/// The scale of the displayed graphic (if shown).
@@ -150,6 +150,8 @@ public:
 	bool getStatus(Cursor &, FuncRequest const &, FuncStatus &) const;
 	/// external file can be embedded
 	void registerEmbeddedFiles(Buffer const &, EmbeddedFiles &) const;
+	///
+	void updateEmbeddedFile(Buffer const &, EmbeddedFile const &);
 
 protected:
 	InsetExternal(InsetExternal const &);