diff --git a/blocks/image-placeholder/index.js b/blocks/image-placeholder/index.js
index 9b81bdc2d8168..5a92827f0c8dc 100644
--- a/blocks/image-placeholder/index.js
+++ b/blocks/image-placeholder/index.js
@@ -1,3 +1,8 @@
+/**
+ * External dependencies
+ */
+import { map } from 'lodash';
+
 /**
  * WordPress dependencies
  */
@@ -9,6 +14,7 @@ import { __ } from '@wordpress/i18n';
  * Internal dependencies
  */
 import MediaUpload from '../media-upload';
+import { rawHandler } from '../api';
 
 /**
  *  ImagePlaceHolder is a react component used by blocks containing user configurable images e.g: image and cover image.
@@ -19,7 +25,12 @@ import MediaUpload from '../media-upload';
  */
 export default function ImagePlaceHolder( { className, icon, label, onSelectImage } ) {
 	const setImage = ( [ image ] ) => onSelectImage( image );
-	const dropFiles = ( files ) => mediaUpload( files, setImage );
+	const onFilesDrop = ( files ) => mediaUpload( files, setImage );
+	const onHTMLDrop = ( HTML ) => setImage( map(
+		rawHandler( { HTML, mode: 'BLOCKS' } )
+			.filter( ( { name } ) => name === 'core/image' ),
+		'attributes'
+	) );
 	const uploadFromFiles = ( event ) => mediaUpload( event.target.files, setImage );
 	return (
 		<Placeholder
@@ -28,7 +39,8 @@ export default function ImagePlaceHolder( { className, icon, label, onSelectImag
 			icon={ icon }
 			label={ label } >
 			<DropZone
-				onFilesDrop={ dropFiles }
+				onFilesDrop={ onFilesDrop }
+				onHTMLDrop={ onHTMLDrop }
 			/>
 			<FormFileUpload
 				isLarge
diff --git a/components/drop-zone/index.js b/components/drop-zone/index.js
index 24954fea1605c..1d439572eb5dd 100644
--- a/components/drop-zone/index.js
+++ b/components/drop-zone/index.js
@@ -23,6 +23,7 @@ class DropZone extends Component {
 		this.setZoneNode = this.setZoneNode.bind( this );
 		this.onDrop = this.onDrop.bind( this );
 		this.onFilesDrop = this.onFilesDrop.bind( this );
+		this.onHTMLDrop = this.onHTMLDrop.bind( this );
 
 		this.state = {
 			isDraggingOverDocument: false,
@@ -37,6 +38,7 @@ class DropZone extends Component {
 			updateState: this.setState.bind( this ),
 			onDrop: this.onDrop,
 			onFilesDrop: this.onFilesDrop,
+			onHTMLDrop: this.onHTMLDrop,
 		} );
 	}
 
@@ -56,6 +58,12 @@ class DropZone extends Component {
 		}
 	}
 
+	onHTMLDrop() {
+		if ( this.props.onHTMLDrop ) {
+			this.props.onHTMLDrop( ...arguments );
+		}
+	}
+
 	setZoneNode( node ) {
 		this.zone = node;
 	}
diff --git a/components/drop-zone/provider.js b/components/drop-zone/provider.js
index 628f2cc0e13d3..d9b2e28ff0a19 100644
--- a/components/drop-zone/provider.js
+++ b/components/drop-zone/provider.js
@@ -29,8 +29,8 @@ class DropZoneProvider extends Component {
 	getChildContext() {
 		return {
 			dropzones: {
-				add: ( { element, updateState, onDrop, onFilesDrop } ) => {
-					this.dropzones.push( { element, updateState, onDrop, onFilesDrop } );
+				add: ( { element, updateState, onDrop, onFilesDrop, onHTMLDrop } ) => {
+					this.dropzones.push( { element, updateState, onDrop, onFilesDrop, onHTMLDrop } );
 				},
 				remove: ( element ) => {
 					this.dropzones = filter( this.dropzones, ( dropzone ) => dropzone.element !== element );
@@ -174,8 +174,15 @@ class DropZoneProvider extends Component {
 			return;
 		}
 
-		if ( event.dataTransfer && !! dropzone && !! dropzone.onFilesDrop ) {
-			dropzone.onFilesDrop( Array.prototype.slice.call( event.dataTransfer.files ), position );
+		if ( event.dataTransfer && !! dropzone ) {
+			const files = event.dataTransfer.files;
+			const HTML = event.dataTransfer.getData( 'text/html' );
+
+			if ( files.length && dropzone.onFilesDrop ) {
+				dropzone.onFilesDrop( [ ...event.dataTransfer.files ], position );
+			} else if ( HTML && dropzone.onHTMLDrop ) {
+				dropzone.onHTMLDrop( HTML, position );
+			}
 		}
 
 		event.stopPropagation();
diff --git a/editor/components/block-drop-zone/index.js b/editor/components/block-drop-zone/index.js
index 00e43e85372c1..d3836f32f98f7 100644
--- a/editor/components/block-drop-zone/index.js
+++ b/editor/components/block-drop-zone/index.js
@@ -8,7 +8,7 @@ import { reduce, get, find } from 'lodash';
  * WordPress dependencies
  */
 import { DropZone, withContext } from '@wordpress/components';
-import { getBlockTypes } from '@wordpress/blocks';
+import { getBlockTypes, rawHandler } from '@wordpress/blocks';
 import { compose } from '@wordpress/element';
 
 /**
@@ -21,7 +21,13 @@ function BlockDropZone( { index, isLocked, ...props } ) {
 		return null;
 	}
 
-	const dropFiles = ( files, position ) => {
+	const getInsertPosition = ( position ) => {
+		if ( index !== undefined ) {
+			return position.y === 'top' ? index : index + 1;
+		}
+	};
+
+	const onDropFiles = ( files, position ) => {
 		const transformation = reduce( getBlockTypes(), ( ret, blockType ) => {
 			if ( ret ) {
 				return ret;
@@ -33,19 +39,26 @@ function BlockDropZone( { index, isLocked, ...props } ) {
 		}, false );
 
 		if ( transformation ) {
-			let insertPosition;
-			if ( index !== undefined ) {
-				insertPosition = position.y === 'top' ? index : index + 1;
-			}
+			const insertPosition = getInsertPosition( position );
+
 			transformation.transform( files ).then( ( blocks ) => {
 				props.insertBlocks( blocks, insertPosition );
 			} );
 		}
 	};
 
+	const onHTMLDrop = ( HTML, position ) => {
+		const blocks = rawHandler( { HTML, mode: 'BLOCKS' } );
+
+		if ( blocks.length ) {
+			props.insertBlocks( blocks, getInsertPosition( position ) );
+		}
+	};
+
 	return (
 		<DropZone
-			onFilesDrop={ dropFiles }
+			onFilesDrop={ onDropFiles }
+			onHTMLDrop={ onHTMLDrop }
 		/>
 	);
 }