Admin-End Image Upload Issue – Insert Image Button Not Working

I am not able to upload images in the admin-end by clicking "Insert Image" link in CMS block or CMS page.

On Clicking Insert Image link the Media gallery popup appears. Then on clicking the browse button it allows me to select image from my machine, but after selecting the image, it throws the error in console and doesn't show me the image in Media gallery popup to upload the image in Magento.

I am getting below error message in the firebug console.

<admin-end url>/cms_wysiwyg_images/thumbnail/file/QWJvdXRfUGV0RG9vcnMuY29tX2ltYWdlX29mX2JvcmRlcl9jb2xsaWVfYW5kX2dvbGRlbl9yZXRyaWV2ZXJfZ29pbmdfdGhyb3VnaF9kb2dneV9kb29yXzEucG5n/

When I am trying to open this link directly in the browser, it is generating error report.
The error in error report is below :

"Unsupported image format.";i:1;s:1512:"#0 lib/Varien/Image/Adapter/Gd2.php(60): Varien_Image_Adapter_Gd2->_getCallback('create')

Same thing is working absolutely fine in my staging environment but creating issue on live.
Staging and live site are on same server.
I have tried uploading different image types as well like gif, png, jpg, but everytime the issue is same.

What can be the probable cause of this issue and how can I fix it?