I assume you are talking about uploading it as an attachment to a post (as opposed to the photo gallery) ?
PNG files work fine for me - I've attached one here as a test.
You should note that there is a file size limit of 500kb on PNG files. If you have a larger file - you should save it as a JPG first.
If the file is a photo, JPG is the best format - PNG is better for graphics like screen shots or logos and such.