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Aiming at resolving the conflict between security and efficiency in the design of chaotic image encryption algorithms, an image encryption algorithm based on information hiding is proposed based on the “one-time pad” idea. A random parameter is introduced to ensure a different keystream for each encryption, which has the characteristics of “one-time pad”, improving the security of the algorithm rapidly without significant increase in algorithm complexity. The random parameter is embedded into the ciphered image with information hiding technology, which avoids negotiation for its transport and makes the application of the algorithm easier. Algorithm analysis and experiments show that the algorithm is secure against chosen plaintext attack, differential attack and divide-and-conquer attack, and has good statistical properties in ciphered images.