Applying an image to an Image or Panel

Does an image have to be a specific type, so that you can simply drag it from a folder in a Unity project and drop it on top of the Source Image field of the Image component of a UI element, such as a Panel?

I try to do this with a jpg logo, in order to apply it to a Panel element, but it would not apply. Trying with an Image element would not work either. What am I missing or doing wrong?

It needs to be a sprite in the import settings.

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Thank you DWilliams. Resolved…