How to insert HTML (including images) in an e-mail in Outlook 2016+

The answer is very simple. In a way, it's obvious, but in another way, it's not.

The answer is that each segment of HTML code inserted has to be a complete HTML file, including the <!DOCTYPE>, <HTML> and <body> tags, not just the desired HTML code. The reason this is not obvious is because if you insert multiple code segments, each one has to be a complete HTML file, which is something you would never do when actually writing HTML. I presume that what is happening is that when Outlook detects a valid HTML file being "Inserted as Text", it strips the opening and closing <!DOCTYPE>, <HTML> and <body> tags and then inserts the code that was between them -- as HTML, not as text.

So, the solution I found was that instead of the single line of code shown in the question, I need to "Insert as Text" a file containing:

<!DOCTYPE html>
<html>
<body>
<img src="https://www.lenetek.com/blog/how-to-create-html-emails-in-outlook/images/attach_file.jpg" alt="Random online image">
</body>
</html> 

When I insert that as text in my e-mail, I see the image, not the code.

In all the sources I found online that said to use "Insert as Text" to insert HTML in Outlook, none of them said it had to be a complete HTML file instead of just the desired code. So maybe this Q&A will be helpful to someone else, if I'm not the only person who had to scratch my head for a long time before thinking of that.

========================

Added details about using HTML in the e-mail:

As pointed out in the Lenetek article linked in the question, Outlook does not support all HTML tags. In particular, for embedding images, I have found:

When sending from Outlook: Outlook does not support <figure> and <FigCaption>. I found that an image and caption placed in those tags were rendered inline, just ignoring the tags. For floating to the right margin, I found I was able to get the same results by replacing <figure> with <table> and then placing the image and its caption each inside of <TR><TD>...</TD></TR>.

When receiving in Outlook: There are differences in how different e-mail clients interpret HTML, which is probably why some e-mails come with a link at the top for viewing the e-mail in one's browser. In particular, I've read that Outlook is not well behaved in this regard. And that was the case with my right-floated image referred to above.

After doing the "Insert as Text" trick, the image appeared correctly at the right margin in the draft e-mail in Outlook, but when it was sent, the CSS style float attribute was ignored and the table appeared by itself at the left margin with no text wrapped around it. I was able to fix this by, in the <table> tag, replacing the style attribute float: right; with the old-fashioned HTML attribute align="right". With that, the image and caption appeared correctly at the right margin when received in Outlook. I have not tested what it looks like in other e-mail clients.

In addition to NewSites answer, I want to point out, that in current Outlook 365 versions the option for "Insert as text" does not appear in the standard settings. The mentioned function under the "attach" tab does NOT offer the "Insert as text" option in the modal window.

For this to work, you will have to add a new tab yourself to the ribbon and add the "Attach" button to this new tab. Once you click this newly added button, you will get a modal with the little dropdown next to the "Insert" button.

I had this same issue and have been so frustrated. It's actually super easy. The trick is to use outlook.live.com. Type any word in the body, highlight it, right click, select "inspect". The code will appear and the word you typed in the body of the email should be highlighted. Right click in the code and select "edit as html." Then, in the code, highlight the word you typed in the body and replace it with your code. Voila! (I learned that here: https://youtu.be/yZOYRhB6ONs)

I had issues displaying the linked image while generating outlook email using HTML code. Somehow it works on a couple of machines, but most didn't show the image.

Kept on researching knowing the problem is with Outlook interpreting the HTML code. And then I reached this thread and the @NewSites answer really nailed it. Just added the line <!DOCTYPE HTML> at the top of my HTML code and all are working perfectly now.

Outlook 365 (2022 Update)

For Outlook 365, the Attach option needs to be enabled manually. Modify the Command Ribbon from inside the message, not the main Outlook window:

Note this option is Attach File without subcommands, i.e. the "classic" Attach File.

From there you can choose Insert as Text as the HTML snippet will show up as processed, not just code.

^{Outlook version for this post: Microsoft® Outlook® for Microsoft 365 MSO (Version 2202 Build 16.0.14931.20652) 64-bit}