I think what you want might be to run the following from the command line:

ipython notebook --matplotlib=inline

If you don’t like typing it at the cmd line every time then you could create an alias to do it for you.

In your ipython_config.py file, search for the following lines

# c.InteractiveShellApp.matplotlib = None

and

# c.InteractiveShellApp.pylab = None

and uncomment them. Then, change None to the backend that you’re using (I use 'qt4') and save the file. Restart IPython, and matplotlib and pylab should be loaded – you can use the dir() command to verify which modules are in the global namespace.

In (the current) IPython 3.2.0 (Python 2 or 3)

Open the configuration file within the hidden folder .ipython

~/.ipython/profile_default/ipython_kernel_config.py

add the following line

c.IPKernelApp.matplotlib = 'inline'

add it straight after

c = get_config()

Further to @Kyle Kelley and @DGrady, here is the entry which can be found in the

$HOME/.ipython/profile_default/ipython_kernel_config.py (or whichever profile you have created)

Change

# Configure matplotlib for interactive use with the default matplotlib backend.
# c.IPKernelApp.matplotlib = none

to

# Configure matplotlib for interactive use with the default matplotlib backend.
c.IPKernelApp.matplotlib = 'inline'

This will then work in both ipython qtconsole and notebook sessions.

The setting was disabled in Jupyter 5.X and higher by adding below code

pylab = Unicode('disabled', config=True,
    help=_("""
    DISABLED: use %pylab or %matplotlib in the notebook to enable matplotlib.
    """)
)

@observe('pylab')
def _update_pylab(self, change):
    """when --pylab is specified, display a warning and exit"""
    if change['new'] != 'warn':
        backend = ' %s' % change['new']
    else:
        backend = ''
    self.log.error(_("Support for specifying --pylab on the command line has been removed."))
    self.log.error(
        _("Please use `%pylab{0}` or `%matplotlib{0}` in the notebook itself.").format(backend)
    )
    self.exit(1)

And in previous versions it has majorly been a warning. But this not a big issue because Jupyter uses concepts of kernels and you can find kernel for your project by running below command

$ jupyter kernelspec list
Available kernels:
  python3    /Users/tarunlalwani/Documents/Projects/SO/notebookinline/bin/../share/jupyter/kernels/python3

This gives me the path to the kernel folder. Now if I open the /Users/tarunlalwani/Documents/Projects/SO/notebookinline/bin/../share/jupyter/kernels/python3/kernel.json file, I see something like below

{
 "argv": [
  "python",
  "-m",
  "ipykernel_launcher",
  "-f",
  "{connection_file}",
 ],
 "display_name": "Python 3",
 "language": "python"
}

So you can see what command is executed to launch the kernel. So if you run the below command

$ python -m ipykernel_launcher --help
IPython: an enhanced interactive Python shell.

Subcommands
-----------

Subcommands are launched as `ipython-kernel cmd [args]`. For information on
using subcommand 'cmd', do: `ipython-kernel cmd -h`.

install
    Install the IPython kernel

Options
-------

Arguments that take values are actually convenience aliases to full
Configurables, whose aliases are listed on the help line. For more information
on full configurables, see '--help-all'.

....
--pylab=<CaselessStrEnum> (InteractiveShellApp.pylab)
    Default: None
    Choices: ['auto', 'agg', 'gtk', 'gtk3', 'inline', 'ipympl', 'nbagg', 'notebook', 'osx', 'pdf', 'ps', 'qt', 'qt4', 'qt5', 'svg', 'tk', 'widget', 'wx']
    Pre-load matplotlib and numpy for interactive use, selecting a particular
    matplotlib backend and loop integration.
--matplotlib=<CaselessStrEnum> (InteractiveShellApp.matplotlib)
    Default: None
    Choices: ['auto', 'agg', 'gtk', 'gtk3', 'inline', 'ipympl', 'nbagg', 'notebook', 'osx', 'pdf', 'ps', 'qt', 'qt4', 'qt5', 'svg', 'tk', 'widget', 'wx']
    Configure matplotlib for interactive use with the default matplotlib
    backend.
...    
To see all available configurables, use `--help-all`

So now if we update our kernel.json file to

{
 "argv": [
  "python",
  "-m",
  "ipykernel_launcher",
  "-f",
  "{connection_file}",
  "--pylab",
  "inline"
 ],
 "display_name": "Python 3",
 "language": "python"
}

And if I run jupyter notebook the graphs are automatically inline

Note the below approach also still works, where you create a file on below path

~/.ipython/profile_default/ipython_kernel_config.py

c = get_config()
c.IPKernelApp.matplotlib = 'inline'

But the disadvantage of this approach is that this is a global impact on every environment using python. You can consider that as an advantage also if you want to have a common behaviour across environments with a single change.

So choose which approach you would like to use based on your requirement

Create any .py file in ~/.ipython/profile_default/startup/ containing

get_ipython().magic('matplotlib inline')