// Use AlternateView to create HTML body ("cid:image" - here we place the image):

using(AlternateView htmlView = AlternateView.CreateAlternateViewFromString(

   "This is an <b>Html</b> e-mail message with <i>embedded image</i> below\r\n<img src='cid:image'>",

   null, "text/html"))

{

   // Create LinkedResource to specify an embedded image:

    using (LinkedResource image = new LinkedResource("c:\\IMAGE.jpg"))

   {

       // ContentId should be equals to the CID that we specified above

        image.ContentId = "image";

       htmlView.LinkedResources.Add(image);

       mail.AlternateViews.Add(htmlView);

       // Create SmtpClient as reqular:

        SmtpClient smtp = new SmtpClient("mail.zayko.net");

       // Set Credential if needed:

        smtp.Credentials = new System.Net.NetworkCredential("mailusername", "mailpassword");

       // ...and here we go:

        smtp.Send(mail);

   }

}