diff --git a/lisp/ox-latex.el b/lisp/ox-latex.el
index 57ea66ef1..b36c46f13 100644
--- a/lisp/ox-latex.el
+++ b/lisp/ox-latex.el
@@ -2741,16 +2741,33 @@ used as a communication channel."
 	 ;; Retrieve latex attributes from the element around.
 	 (attr (org-export-read-attribute :attr_latex parent))
 	 (float (let ((float (plist-get attr :float)))
-		  (cond ((string= float "wrap") 'wrap)
-			((string= float "sideways") 'sideways)
-			((string= float "multicolumn") 'multicolumn)
-                        ((string= float "t") 'figure)
-			((and (plist-member attr :float) (not float)) 'nonfloat)
-                        (float float)
-			((or (org-element-property :caption parent)
-			     (org-string-nw-p (plist-get attr :caption)))
-			 'figure)
-			(t 'nonfloat))))
+		  (cond
+                   ((org-element-map (org-element-contents parent) t
+                      (lambda (node)
+                        (cond
+                         ((and (org-element-type-p node 'plain-text)
+                               (not (org-string-nw-p node)))
+                          nil)
+                         ((eq link node)
+                          ;; Objects inside link description are
+                          ;; allowed.
+                          (throw :org-element-skip nil))
+                         (t 'not-a-float)))
+                      info 'first-match)
+                    ;; Not a single link inside paragraph (spaces
+                    ;; ignored).  Cannot use float environment.  It
+                    ;; would be inside paragraph.
+                    nil)
+                   ((string= float "wrap") 'wrap)
+		   ((string= float "sideways") 'sideways)
+		   ((string= float "multicolumn") 'multicolumn)
+                   ((string= float "t") 'figure)
+		   ((and (plist-member attr :float) (not float)) 'nonfloat)
+                   (float float)
+		   ((or (org-element-property :caption parent)
+			(org-string-nw-p (plist-get attr :caption)))
+		    'figure)
+		   (t 'nonfloat))))
 	 (placement
 	  (let ((place (plist-get attr :placement)))
 	    (cond
diff --git a/lisp/ox.el b/lisp/ox.el
index 9178d53cd..34ea32b3b 100644
--- a/lisp/ox.el
+++ b/lisp/ox.el
@@ -4360,7 +4360,7 @@ Return modified DATA."
 			     (or rules org-export-default-inline-image-rule))
 		;; Replace contents with image link.
 		(org-element-adopt
-		    (org-element-set-contents l nil)
+		    (org-element-set-contents l)
 		  (with-temp-buffer
 		    (save-excursion (insert contents))
 		    (org-element-link-parser))))))))
diff --git a/testing/lisp/test-ox-latex.el b/testing/lisp/test-ox-latex.el
index 35e37e46a..41df1b823 100644
--- a/testing/lisp/test-ox-latex.el
+++ b/testing/lisp/test-ox-latex.el
@@ -93,5 +93,16 @@ Column & Column \\\\[0pt]
       "\\hline\\multicolumn{2}{r}{Continued on next page} \\\\
 \\endfoot"))))
 
+(ert-deftest test-ox-latex/inline-image ()
+  "Test inline images."
+  (org-test-with-exported-text
+      'latex
+      "#+caption: Schematic
+[[https://orgmode.org/worg/images/orgmode/org-mode-unicorn.svg][file:/wallpaper.png]]"
+    (goto-char (point-min))
+    (should
+     (search-forward
+      "\\href{https://orgmode.org/worg/images/orgmode/org-mode-unicorn.svg}{\\includegraphics[width=.9\\linewidth]{/wallpaper.png}}"))))
+
 (provide 'test-ox-latex)
 ;;; test-ox-latex.el ends here