diff --git a/config/defaults.hjson b/config/defaults.hjson
index 6c8bd2bb3..94c185a1d 100644
--- a/config/defaults.hjson
+++ b/config/defaults.hjson
@@ -36,29 +36,36 @@
     # Maximum number of active sql connections
     pool_size: 95
   }
-  # Settings related to activitypub federation
   # Pictrs image server configuration.
   pictrs: {
     # Address where pictrs is available (for image hosting)
     url: "http://localhost:8080/"
     # Set a custom pictrs API key. ( Required for deleting images )
     api_key: "string"
-    # If enabled, all images from remote domains are rewritten to pass through `/api/v3/image_proxy`.
-    # This improves privacy as users don't expose their IP to untrusted servers, and decreases load
-    # on other servers. However it causes more load for the local server.
-    # 
-    # Requires pict-rs 0.5
-    image_proxy: false
-    # By default the thumbnails for external links are stored in pict-rs. This ensures that they
-    # can be reliably retrieved and can be resized using pict-rs APIs. However it also increases
-    # storage usage. In case this is disabled, the Opengraph image is directly returned as
-    # thumbnail.Note that it still gets proxied through the local instance if `image_proxy` is
-    # enabled.
-    # 
-    # In some countries it is forbidden to copy preview images from newspaper articles and only
-    # hotlinking is allowed. If that is the case for your instance, make sure that `image_proxy` and
-    # `cache_external_link_previews` are both disabled.
-    cache_external_link_previews: true
+    # Specifies how to handle remote images, so that users don't have to connect directly to remote servers.
+    image_mode: 
+      # Leave images unchanged, don't generate any local thumbnails for post urls. Instead the the
+      # Opengraph image is directly returned as thumbnail
+      "None"
+
+      # or
+
+      # Generate thumbnails for external post urls and store them persistently in pict-rs. This
+      # ensures that they can be reliably retrieved and can be resized using pict-rs APIs. However
+      # it also increases storage usage.
+      # 
+      # This is the default behaviour, and also matches Lemmy 0.18.
+      "StoreLinkPreviews"
+
+      # or
+
+      # If enabled, all images from remote domains are rewritten to pass through `/api/v3/image_proxy`,
+      # including embedded images in markdown. Images are stored temporarily in pict-rs for caching.
+      # This improves privacy as users don't expose their IP to untrusted servers, and decreases load
+      # on other servers. However it increases bandwidth use for the local server.
+      # 
+      # Requires pict-rs 0.5
+      "ProxyAllImages"
     # Timeout for uploading images to pictrs (in seconds)
     upload_timeout: 30
   }
diff --git a/crates/api_common/src/request.rs b/crates/api_common/src/request.rs
index 10a339f42..bf6e71596 100644
--- a/crates/api_common/src/request.rs
+++ b/crates/api_common/src/request.rs
@@ -7,7 +7,7 @@ use encoding::{all::encodings, DecoderTrap};
 use lemmy_db_schema::newtypes::DbUrl;
 use lemmy_utils::{
   error::{LemmyError, LemmyErrorType},
-  settings::structs::Settings,
+  settings::structs::{ImageProxyMode, Settings},
   version::VERSION,
   REQWEST_TIMEOUT,
 };
@@ -258,7 +258,7 @@ async fn generate_pictrs_thumbnail(
 ) -> Result<Url, LemmyError> {
   let pictrs_config = context.settings().pictrs_config()?;
 
-  if !pictrs_config.cache_external_link_previews {
+  if pictrs_config.image_mode == ImageProxyMode::ProxyAllImages {
     return Ok(proxy_image_link(image_url.clone(), context).await?.into());
   }
 
diff --git a/crates/api_common/src/utils.rs b/crates/api_common/src/utils.rs
index c377f1838..b5e52f433 100644
--- a/crates/api_common/src/utils.rs
+++ b/crates/api_common/src/utils.rs
@@ -35,7 +35,7 @@ use lemmy_utils::{
   email::{send_email, translations::Lang},
   error::{LemmyError, LemmyErrorExt, LemmyErrorType, LemmyResult},
   rate_limit::{ActionType, BucketConfig},
-  settings::structs::Settings,
+  settings::structs::{ImageProxyMode, Settings},
   utils::{
     markdown::markdown_rewrite_image_links,
     slurs::{build_slur_regex, remove_slurs},
@@ -846,7 +846,7 @@ pub async fn process_markdown(
   context: &LemmyContext,
 ) -> LemmyResult<String> {
   let text = remove_slurs(text, slur_regex);
-  if context.settings().pictrs_config()?.image_proxy {
+  if context.settings().pictrs_config()?.image_mode == ImageProxyMode::ProxyAllImages {
     let (text, links) = markdown_rewrite_image_links(text);
     RemoteImage::create(&mut context.pool(), links).await?;
     Ok(text)
@@ -872,13 +872,13 @@ pub async fn process_markdown_opt(
 /// as separate parameter so it can be changed in tests.
 async fn proxy_image_link_internal(
   link: Url,
-  force_image_proxy: bool,
+  image_proxy_mode: ImageProxyMode,
   context: &LemmyContext,
 ) -> LemmyResult<DbUrl> {
   // Dont rewrite links pointing to local domain.
-  if link.domain() == Some(&context.settings().hostname) || !force_image_proxy {
+  if link.domain() == Some(&context.settings().hostname) {
     Ok(link.into())
-  } else {
+  } else if image_proxy_mode == ImageProxyMode::ProxyAllImages {
     let proxied = format!(
       "{}/api/v3/image_proxy?url={}",
       context.settings().get_protocol_and_hostname(),
@@ -886,6 +886,8 @@ async fn proxy_image_link_internal(
     );
     RemoteImage::create(&mut context.pool(), vec![link]).await?;
     Ok(Url::parse(&proxied)?.into())
+  } else {
+    Ok(link.into())
   }
 }
 
@@ -894,7 +896,7 @@ async fn proxy_image_link_internal(
 pub(crate) async fn proxy_image_link(link: Url, context: &LemmyContext) -> LemmyResult<DbUrl> {
   proxy_image_link_internal(
     link,
-    context.settings().pictrs_config()?.image_proxy,
+    context.settings().pictrs_config()?.image_mode,
     context,
   )
   .await
@@ -993,16 +995,21 @@ mod tests {
 
     // image from local domain is unchanged
     let local_url = Url::parse("http://lemmy-alpha/image.png").unwrap();
-    let proxied = proxy_image_link_internal(local_url.clone(), true, &context)
-      .await
-      .unwrap();
+    let proxied =
+      proxy_image_link_internal(local_url.clone(), ImageProxyMode::ProxyAllImages, &context)
+        .await
+        .unwrap();
     assert_eq!(&local_url, proxied.inner());
 
     // image from remote domain is proxied
     let remote_image = Url::parse("http://lemmy-beta/image.png").unwrap();
-    let proxied = proxy_image_link_internal(remote_image.clone(), true, &context)
-      .await
-      .unwrap();
+    let proxied = proxy_image_link_internal(
+      remote_image.clone(),
+      ImageProxyMode::ProxyAllImages,
+      &context,
+    )
+    .await
+    .unwrap();
     assert_eq!(
       "https://lemmy-alpha/api/v3/image_proxy?url=http%3A%2F%2Flemmy-beta%2Fimage.png",
       proxied.as_str()
diff --git a/crates/utils/src/settings/structs.rs b/crates/utils/src/settings/structs.rs
index 222391bf5..fd8e73506 100644
--- a/crates/utils/src/settings/structs.rs
+++ b/crates/utils/src/settings/structs.rs
@@ -12,7 +12,6 @@ pub struct Settings {
   /// settings related to the postgresql database
   #[default(Default::default())]
   pub database: DatabaseConfig,
-  /// Settings related to activitypub federation
   /// Pictrs image server configuration.
   #[default(Some(Default::default()))]
   pub(crate) pictrs: Option<PictrsConfig>,
@@ -79,31 +78,37 @@ pub struct PictrsConfig {
   #[default(None)]
   pub api_key: Option<String>,
 
-  /// If enabled, all images from remote domains are rewritten to pass through `/api/v3/image_proxy`.
-  /// This improves privacy as users don't expose their IP to untrusted servers, and decreases load
-  /// on other servers. However it causes more load for the local server.
-  ///
-  /// Requires pict-rs 0.5
-  #[default(false)]
-  pub image_proxy: bool,
-
-  /// By default the thumbnails for external links are stored in pict-rs. This ensures that they
-  /// can be reliably retrieved and can be resized using pict-rs APIs. However it also increases
-  /// storage usage. In case this is disabled, the Opengraph image is directly returned as
-  /// thumbnail.Note that it still gets proxied through the local instance if `image_proxy` is
-  /// enabled.
-  ///
-  /// In some countries it is forbidden to copy preview images from newspaper articles and only
-  /// hotlinking is allowed. If that is the case for your instance, make sure that `image_proxy` and
-  /// `cache_external_link_previews` are both disabled.
-  #[default(true)]
-  pub cache_external_link_previews: bool,
+  /// Specifies how to handle remote images, so that users don't have to connect directly to remote servers.
+  #[default(ImageProxyMode::StoreLinkPreviews)]
+  pub image_mode: ImageProxyMode,
 
   /// Timeout for uploading images to pictrs (in seconds)
   #[default(30)]
   pub upload_timeout: u64,
 }
 
+#[derive(Debug, Deserialize, Serialize, Clone, SmartDefault, Document, PartialEq)]
+#[serde(deny_unknown_fields)]
+pub enum ImageProxyMode {
+  /// Leave images unchanged, don't generate any local thumbnails for post urls. Instead the the
+  /// Opengraph image is directly returned as thumbnail
+  None,
+  /// Generate thumbnails for external post urls and store them persistently in pict-rs. This
+  /// ensures that they can be reliably retrieved and can be resized using pict-rs APIs. However
+  /// it also increases storage usage.
+  ///
+  /// This is the default behaviour, and also matches Lemmy 0.18.
+  #[default]
+  StoreLinkPreviews,
+  /// If enabled, all images from remote domains are rewritten to pass through `/api/v3/image_proxy`,
+  /// including embedded images in markdown. Images are stored temporarily in pict-rs for caching.
+  /// This improves privacy as users don't expose their IP to untrusted servers, and decreases load
+  /// on other servers. However it increases bandwidth use for the local server.
+  ///
+  /// Requires pict-rs 0.5
+  ProxyAllImages,
+}
+
 #[derive(Debug, Deserialize, Serialize, Clone, SmartDefault, Document)]
 #[serde(default)]
 pub struct DatabaseConfig {