Illustrator turning images to very grainy

[DEFECT]

Hey guys, so Im trying to place an image on a template in illustrator, but when I resize the image to fit the template it gets very grainy. What is the correct way to do this so the image doesnt lose quality?

[garricks]

Defect, are you making it larger or smaller?

It might be a better idea to size it in Photoshop, then load it into Illy at 100%.

But if you're making it bigger, you're going to lose quality no matter what you do.

[DEFECT]

Smaller. Its for some packaging, and I was going to put the text in with illustrator... hmm.. ill resize it in PS. thanks.

[PrintDriver]

is it an .eps image? you need to turn on high res .eps preview in preferences. it's not defaulted to on.