diff --git a/src/graphics/ChangeLog b/src/graphics/ChangeLog
index d8b4a1b8aa..95b60e1b6f 100644
--- a/src/graphics/ChangeLog
+++ b/src/graphics/ChangeLog
@@ -2,6 +2,8 @@
 
 	* ImageLoaderXPM.C (runImageLoader): If the pixmap contains a
 	transparent colour, then set it to the colour of the background.
+	Also take account of the monochrome, grayscale of color
+	preferences option.
 
 2001-09-20  Angus Leeming  <a.leeming@ic.ac.uk>
 
diff --git a/src/graphics/ImageLoaderXPM.C b/src/graphics/ImageLoaderXPM.C
index 47322bab08..37e66132ee 100644
--- a/src/graphics/ImageLoaderXPM.C
+++ b/src/graphics/ImageLoaderXPM.C
@@ -14,6 +14,7 @@
 #include <config.h>
 #include "ImageLoaderXPM.h"
 #include "ColorHandler.h"
+#include "lyxrc.h"
 #include "frontends/support/LyXImage.h"
 #include "frontends/GUIRunTime.h"
 #include "support/filetools.h"
@@ -76,12 +77,39 @@ ImageLoaderXPM::runImageLoader(string const & filename)
 	xpm_col.pixel = lyxColorHandler->colorPixel(LColor::graphicsbg);
 
 	XpmAttributes attrib;
-	attrib.valuemask = XpmCloseness | XpmColorSymbols;
+	attrib.valuemask = XpmCloseness | XpmColorSymbols | XpmColorKey;
+
 	attrib.closeness = 10000;
-	attrib.valuemask = XpmColorSymbols;
+
 	attrib.numsymbols = 1;
 	attrib.colorsymbols = &xpm_col;
 
+	// Set color_key to monochrome, grayscale or color
+	// (Angus 21 Sep 2001)
+	int color_key = 0;
+	if (lyxrc.display_graphics == "color") {
+		color_key = XPM_COLOR;
+
+	} else if (lyxrc.display_graphics == "gray") {
+		color_key = XPM_GRAY;
+
+	} else if (lyxrc.display_graphics == "mono") {
+		color_key = XPM_MONO;
+	}
+
+	// If setting color_key failed, then fail gracefully!
+	if (color_key != 0) {
+		attrib.valuemask = attrib.valuemask | XpmColorKey;
+		attrib.color_key = color_key;
+
+	} else {
+		lyxerr << "Warning in ImageLoaderXPM::runImageLoader"
+		       << "lyxrc.display_graphics == \""
+		       << lyxrc.display_graphics
+		       << "\""
+		       << endl;
+	}		
+
 	int status = XpmReadFileToPixmap(
 			display, 
 			XRootWindowOfScreen(screen), 
@@ -90,8 +118,8 @@ ImageLoaderXPM::runImageLoader(string const & filename)
 
 	if (status != XpmSuccess) {
 		lyxerr << "Error reading XPM file '" 
-			<< XpmGetErrorString(status) << "'"
-			<< endl;
+		       << XpmGetErrorString(status) << "'"
+		       << endl;
 		return ErrorWhileLoading;
 	}