Placing a PNG file with transparency

If I have a psd / Png file on Photoshop that has text with no background (transparent), and I do a Place of that file into Illustrator, I get a white background in additiotion to the Text.
How do I stop the white background from placing withing the Illustrator? I have Illustrator CS3 and Photoshop CS3
Thanks in advance.


Half a decade later, I am getting the same problem as the original poster   (although I am using Illustrator CC 64bit on Windows 8).
I am trying to 'place' a PNG graphic in Illustrator, The PNG has a transparent background, which is being honoured fine in other programs (e.g. web browsers - even in its icon in Windows Explorer).
However when I place it in Illustrator, the transparency doesn't work: instead the background is displayed as an opaque colour. It stays that way if I output to a PDF from Illustrator.
The PNG in question is a 'paletted' type (I think it has a palette of 256 colours) - one of which is set to be transparent.
Does Adobe Illustrator not support transparency in paletted PNG files?
(I'm aware that you can generate a 24-bit PNG with the transparency done as an 'alpha channel'), but this is wasteful for many simple types of graphic, creating a much bigger PNG file size.