diff --git a/doc/api/index.rst b/doc/api/index.rst
index 0598fd103f8..5ccf2a3f043 100644
--- a/doc/api/index.rst
+++ b/doc/api/index.rst
@@ -37,6 +37,7 @@ Plotting data and laying out the map:
     Figure.shift_origin
     Figure.text
     Figure.meca
+    Figure.inset
 
 Color palette table generation:
 
diff --git a/doc/index.rst b/doc/index.rst
index 71fc08e900b..399c7ad1463 100644
--- a/doc/index.rst
+++ b/doc/index.rst
@@ -38,6 +38,7 @@
     tutorials/contour-map.rst
     tutorials/earth-relief.rst
     tutorials/3d-perspective-image.rst
+    tutorials/inset.rst
     tutorials/configuration.rst
 
 .. toctree::
diff --git a/examples/gallery/plot/inset.py b/examples/gallery/plot/inset.py
new file mode 100644
index 00000000000..8f549b00f49
--- /dev/null
+++ b/examples/gallery/plot/inset.py
@@ -0,0 +1,25 @@
+"""
+Inset
+-----
+
+The :meth:`pygmt.Figure.inset` method adds an inset figure inside a larger
+figure. The function is called using a ``with`` statement, and its position,
+box, offset, and margin parameters are set. Within the ``with`` statement,
+PyGMT plotting functions can be called that add to the inset figure.
+"""
+import pygmt
+
+fig = pygmt.Figure()
+# Create the primary figure, setting the region to Madagascar, the land color to
+# "brown", the water to "lightblue", the shorelines width to "thin", and adding a frame
+fig.coast(region="MG+r2", land="brown", water="lightblue", shorelines="thin", frame="a")
+# Create an inset, setting the position to top left, the width to 3.5 centimeters, and
+# the x- and y-offsets to 0.2 centimeters. The margin is set to 0, and the border is "green".
+with fig.inset(position="jTL+w3.5c+o0.2c", margin=0, box="+pgreen"):
+    # Create a figure in the inset using coast. This example uses the azimuthal
+    # orthogonal projection centered at 47E, 20S. The land is set to "gray" and
+    # Madagascar is highlighted in "red".
+    fig.coast(
+        region="g", projection="G47/-20/3.5c", land="gray", water="white", dcw="MG+gred"
+    )
+fig.show()
diff --git a/examples/tutorials/inset.py b/examples/tutorials/inset.py
new file mode 100644
index 00000000000..7d6b0b98b49
--- /dev/null
+++ b/examples/tutorials/inset.py
@@ -0,0 +1,110 @@
+"""
+Adding an inset to the figure
+=============================
+
+To plot an inset figure inside another larger figure, we can use the
+:meth:`pygmt.Figure.inset` method. After a large figure has been created,
+call ``inset`` using a ``with`` statement, and new plot elements will be
+added to the inset figure instead of the larger figure.
+"""
+# sphinx_gallery_thumbnail_number = 4
+
+import pygmt
+
+########################################################################################
+#
+# Prior to creating an inset figure, a larger figure must first be plotted. In the
+# example below, :meth:`pygmt.Figure.coast` is used to create a map of the US state of
+# Massachusetts.
+
+fig = pygmt.Figure()
+fig.coast(
+    region=[-74, -69.5, 41, 43],  # Set bounding box of the large figure
+    borders="2/thin",  # Plot state boundaries with thin lines
+    shorelines="thin",  # Plot coastline with thin lines
+    projection="M15c",  # Set Mercator projection and size of 15 centimeter
+    land="lightyellow",  # Color land areas light yellow
+    water="lightblue",  # Color water areas light blue
+    frame="a",  # Set frame with annotation and major tick spacing
+)
+fig.show()
+
+########################################################################################
+#
+# The :meth:`pygmt.Figure.inset` method uses a context manager, and is called using a
+# ``with`` statement. The ``position`` argument, including the inset width, is required
+# to plot the inset. Using the **j** argument, the location of the inset is
+# set to one of the 9 anchors (bottom-middle-top and left-center-right). In the
+# example below, ``BL`` sets the inset to the bottom left. The ``box`` argument can
+# set the fill and border of the inset. In the example below, ``+pblack`` sets the
+# border color to black and ``+gred`` sets the fill to red.
+
+fig = pygmt.Figure()
+fig.coast(
+    region=[-74, -69.5, 41, 43],
+    borders="2/thin",
+    shorelines="thin",
+    projection="M15c",
+    land="lightyellow",
+    water="lightblue",
+    frame="a",
+)
+with fig.inset(position="jBL+w3c", box="+pblack+glightred"):
+    # pass is used to exit the with statement as no plotting functions are called
+    pass
+fig.show()
+
+########################################################################################
+#
+# When using **j** to set the anchor of the inset, the default location is in
+# contact with the nearby axis or axes. The offset of the inset can be set with **+o**,
+# followed by the offsets along the x- and y-axis. If only one offset is
+# passed, it is applied to both axes. Each offset can have its own unit. In
+# the example below, the inset is shifted 0.5 centimeters on the x-axis and
+# 0.2 centimeters on the y-axis.
+
+fig = pygmt.Figure()
+fig.coast(
+    region=[-74, -69.5, 41, 43],
+    borders="2/thin",
+    shorelines="thin",
+    projection="M15c",
+    land="lightyellow",
+    water="lightblue",
+    frame="a",
+)
+with fig.inset(position="jBL+w3c+o0.5c/0.2c", box="+pblack+glightred"):
+    pass
+fig.show()
+
+########################################################################################
+#
+# Standard plotting functions can be called from within the ``inset`` context manager.
+# The example below uses :meth:`pygmt.Figure.coast` to plot a zoomed out map that
+# selectively paints the state of Massachusetts to shows its location relative to
+# other states.
+
+fig = pygmt.Figure()
+fig.coast(
+    region=[-74, -69.5, 41, 43],
+    borders="2/thin",
+    shorelines="thin",
+    projection="M15c",
+    land="lightyellow",
+    water="lightblue",
+    frame="a",
+)
+# This does not include an inset fill as it is covered by the inset figure
+with fig.inset(position="jBL+w3c+o0.5c/0.2c", box="+pblack"):
+    # Use a plotting function to create a figure inside the inset
+    fig.coast(
+        region=[-80, -65, 35, 50],
+        projection="M3c",
+        land="gray",
+        borders=[1, 2],
+        shorelines="1/thin",
+        water="white",
+        # Use dcw to selectively highlight an area
+        dcw="US.MA+gred",
+    )
+fig.show()
diff --git a/pygmt/base_plotting.py b/pygmt/base_plotting.py
index 3a28c9895be..b6992f8899b 100644
--- a/pygmt/base_plotting.py
+++ b/pygmt/base_plotting.py
@@ -1642,5 +1642,4 @@ def text(
                 arg_str = " ".join([fname, build_arg_string(kwargs)])
                 lib.call_module("text", arg_str)
 
-    # GMT Supplementary modules
-    from pygmt.src import meca  # pylint: disable=import-outside-toplevel
+    from pygmt.src import inset, meca  # pylint: disable=import-outside-toplevel
diff --git a/pygmt/src/__init__.py b/pygmt/src/__init__.py
index cdbabf1468a..5950d92a7b6 100644
--- a/pygmt/src/__init__.py
+++ b/pygmt/src/__init__.py
@@ -2,4 +2,5 @@
 Source code for PyGMT modules.
 """
 # pylint: disable=import-outside-toplevel
+from pygmt.src.inset import inset
 from pygmt.src.meca import meca
diff --git a/pygmt/src/inset.py b/pygmt/src/inset.py
new file mode 100644
index 00000000000..95a5a04089a
--- /dev/null
+++ b/pygmt/src/inset.py
@@ -0,0 +1,132 @@
+"""
+inset - Create inset figures.
+"""
+import contextlib
+
+from pygmt.clib import Session
+from pygmt.helpers import build_arg_string, fmt_docstring, kwargs_to_strings, use_alias
+
+
+@fmt_docstring
+@contextlib.contextmanager
+@use_alias(D="position", F="box", M="margin", N="no_clip", V="verbose")
+@kwargs_to_strings(D="sequence", M="sequence")
+def inset(self, **kwargs):
+    r"""
+    Create an inset figure to be placed within a larger figure.
+
+    This function sets the position, frame, and margins for a smaller figure
+    inside of the larger figure. Plotting functions that are called within the
+    context manager are added to the inset figure.
+
+    Full option list at :gmt-docs:`inset.html`
+
+    {aliases}
+
+    Parameters
+    ----------
+    position : str or list
+        *xmin/xmax/ymin/ymax*\ [**+r**][**+u**\ *unit*]] \
+        | [**g**\|\ **j**\|\ **J**\|\ **n**\|\ **x**]\ *refpoint*\
+        **+w**\ *width*\ [/*height*][**+j**\ *justify*]
+        [**+o**\ *dx*\ [/*dy*]]
+
+        *This is the only required argument.*
+        Define the map inset rectangle on the map. Specify the rectangle
+        in one of three ways:
+
+        Append **g**\ *lon*/*lat* for map (user) coordinates,
+        **j**\ *code* or **J**\ *code* for setting the *refpoint* via a
+        2-char justification code \ that refers to the (invisible)
+        projected map bounding box, **n**\ *xn*/*yn* for normalized (0-1)
+        bounding box coordinates, or **x**\ *x*/*y* for plot
+        coordinates (inches, cm, points, append unit).
+        All but **x** requires both ``region`` and ``projection`` to be
+        specified. You can offset the reference point via
+        **+o**\ *dx*/*dy* in the direction implied by *code* or
+        **+j**\ *justify*.
+
+        Alternatively, Give *west/east/south/north* of geographic
+        rectangle bounded by parallels and meridians; append **+r** if the
+        coordinates instead are the lower left and upper right corners of
+        the desired rectangle. (Or, give *xmin/xmax/ymin/ymax* of bounding
+        rectangle in projected coordinates and optionally
+        append **+u**\ *unit* [Default coordinate unit is meter (e)].
+
+        Append **+w**\ *width*\ [/*height*] of bounding rectangle or box
+        in plot coordinates (inches, cm, etc.). By default, the anchor
+        point on the scale is assumed to be the bottom left corner (BL),
+        but this can be changed by appending **+j** followed by a 2-char
+        justification code *justify*.
+        **Note**: If **j** is used then *justify* defaults to the same
+        as *refpoint*, if **J** is used then *justify* defaults to the
+        mirror opposite of *refpoint*. Specify inset box attributes via
+        the ``box`` option [outline only].
+    box : str or bool
+        [**+c**\ *clearances*][**+g**\ *fill*][**+i**\ [[*gap*/]\
+        *pen*]][**+p**\ [*pen*]][**+r**\ [*radius*]][**+s**\
+        [[*dx*/*dy*/][*shade*]]]
+
+        If passed ``True``, this draws a rectangular box around the map
+        inset using the default pen; specify a different pen
+        with **+p**\ *pen*. Add **+g**\ *fill* to fill the logo box
+        [Default is no fill].
+        Append **+c**\ *clearance*  where *clearance* is either
+        *gap*, *xgap*\ /\ *ygap*, or *lgap*\ /\ *rgap*\ /\ *bgap*\ /\
+        *tgap* where these items are uniform, separate in x- and
+        y-direction, or individual side spacings between logo and border.
+        Append **+i** to draw a secondary, inner border as well. We use a
+        uniform *gap* between borders of 2\ **p** and the default pen
+        unless other values are specified. Append **+r** to draw rounded
+        rectangular borders instead, with a 6\ **p** corner radius. You
+        can override this radius by appending another value. Append
+        **+s** to draw an offset background shaded region. Here, *dx*/*dy*
+        indicates the shift relative to the foreground frame
+        [4\ **p**/-4\ **p**] and *shade* sets the fill style to use for
+        shading [Default is gray50].
+    margin : int or str or list
+        This is clearance that is added around the inside of the inset.
+        Plotting will take place within the inner region only. The margins
+        can be a single value, a pair of values separated (for setting
+        separate horizontal and vertical margins), or the full set of four
+        margins (for setting separate left, right, bottom, and top
+        margins). When passing multiple values, it can be either a list or
+        a string with the values separated by forward
+        slashes [Default is no margins].
+    no_clip : bool
+        Do NOT clip features extruding outside map inset boundaries [Default
+        will clip].
+    {V}
+
+    Examples
+    --------
+    >>> import pygmt
+    >>>
+    >>> # Create the larger figure
+    >>> fig = pygmt.Figure()
+    >>> fig.coast(region="MG+r2", water="lightblue", shorelines="thin")
+    >>> # Use a "with" statement to initialize the inset context manager
+    >>> # Setting the position to top left and a width of 3.5 centimeters
+    >>> with fig.inset(position="jTL+w3.5c+o0.2c", margin=0, box="+pgreen"):
+    ...     # Map elements under the "with" statement are plotted in the inset
+    ...     fig.coast(
+    ...         region="g",
+    ...         projection="G47/-20/3.5c",
+    ...         land="gray",
+    ...         water="white",
+    ...         dcw="MG+gred",
+    ...     )
+    ...
+    >>> # Map elements outside the "with" block are plotted in the main figure
+    >>> fig.logo(position="jBR+o0.2c+w3c")
+    >>> fig.show()
+    <IPython.core.display.Image object>
+    """
+    kwargs = self._preprocess(**kwargs)  # pylint: disable=protected-access
+    with Session() as lib:
+        try:
+            lib.call_module("inset", f"begin {build_arg_string(kwargs)}")
+            yield
+        finally:
+            v_arg = build_arg_string({"V": kwargs.get("V")})
+            lib.call_module("inset", f"end {v_arg}".strip())
diff --git a/pygmt/tests/test_inset.py b/pygmt/tests/test_inset.py
new file mode 100644
index 00000000000..1d87b5a77f5
--- /dev/null
+++ b/pygmt/tests/test_inset.py
@@ -0,0 +1,42 @@
+"""
+Tests for the inset function.
+"""
+from pygmt import Figure
+from pygmt.helpers.testing import check_figures_equal
+
+
+@check_figures_equal()
+def test_inset_aliases():
+    """
+    Test the aliases for the inset function.
+    """
+    fig_ref, fig_test = Figure(), Figure()
+    fig_ref.basemap(R="MG+r2", B="afg")
+    with fig_ref.inset(D="jTL+w3.5c+o0.2c", M=0, F="+pgreen"):
+        fig_ref.basemap(R="g", J="G47/-20/4c", B="afg")
+
+    fig_test.basemap(region="MG+r2", frame="afg")
+    with fig_test.inset(position="jTL+w3.5c+o0.2c", margin=0, box="+pgreen"):
+        fig_test.basemap(region="g", projection="G47/-20/4c", frame="afg")
+    return fig_ref, fig_test
+
+
+@check_figures_equal()
+def test_inset_context_manager():
+    """
+    Test that the inset context manager works and, once closed, plotting
+    elements are added to the larger figure.
+    """
+    fig_ref, fig_test = Figure(), Figure()
+
+    fig_ref.basemap(region=[-74, -69.5, 41, 43], projection="M9c", frame=True)
+    fig_ref.basemap(rose="jTR+w3c")  # Pass rose argument with basemap before the inset
+    with fig_ref.inset(position="jBL+w3c+o0.2c", margin=0, box="+pblack"):
+        fig_ref.basemap(region=[-80, -65, 35, 50], projection="M3c", frame="afg")
+
+    fig_test.basemap(region=[-74, -69.5, 41, 43], projection="M9c", frame=True)
+    with fig_test.inset(position="jBL+w3c+o0.2c", margin=0, box="+pblack"):
+        fig_test.basemap(region=[-80, -65, 35, 50], projection="M3c", frame="afg")
+    fig_test.basemap(rose="jTR+w3c")  # Pass rose argument with basemap after the inset
+
+    return fig_ref, fig_test