Automatically Set the Featured Image

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<?php
function autoset_featured() {
          global $post;
          $already_has_thumb = has_post_thumbnail($post->ID);
              if (!$already_has_thumb)  {
              $attached_image = get_children( "post_parent=$post->ID&post_type=attachment&post_mime_type=image&numberposts=1" );
                          if ($attached_image) {
                                foreach ($attached_image as $attachment_id => $attachment) {
                                set_post_thumbnail($post->ID, $attachment_id);
                                }
                           }
                        }
      }
add_action('the_post', 'autoset_featured');
add_action('save_post', 'autoset_featured');
add_action('draft_to_publish', 'autoset_featured');
add_action('new_to_publish', 'autoset_featured');
add_action('pending_to_publish', 'autoset_featured');
add_action('future_to_publish', 'autoset_featured');
?>

Instructions:

This snippet automatically sets the featured image by fetching the first image of the post.

However, if you choose a featured image, that will be displayed instead.

Related links:

http://wpforce.com/automatically-set-the-featured-image-in-wordpress/