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Once again I had some trouble with drag&drop between the host and guest using vmware workstation 7. My host is windows 7 and the guest windows xp sp3. I don’t know exactly what fixed the problem in the end but here is what I did: Ensured the gust is running on 32bit color depth Uninstalled vmware tools, reboot, reinstalled vmware tools restart vmware-user process (on guest) restart vmware-tools service (on guest) Tried to disable drag and drop in the guest isolation (read this in some forum) Enabled drag and drop in the guest isolation options again Enabled VMCI in guest isolation page Shutdown the vmware guest system Restart -> fixed