Abstract: Combining encryption with image compression, a new image watermarking technique based on the multiple description coding and wavelet transform is proposed to maintain the robustness, safety and embedding capacity of digital image watermarking. The watermarking images to be hided are transformed into Gray code after coded by multiple description coding algorithm using security key No.1. The color components of a host image are transformed to a difference image. The Gray code is embedded into the host image by inter-block frequency-hopping spread spectrum and security key No.2 finally. Theoretical analysis and numerical simulations show that the proposed algorithm has high embedding capacity and is more robust to common image processing. The security and the ability to resist cropping attack can also be enhanced at the same time using the proposed method.