The need to verify the authenticity of a digital image or video is increasingly common in fields such as litigation and journalism. Currently used methods for digital image authentication include digital signature, content-based signature, pixel-domain watermarking, and frequency-domain data hiding schemes. The advantages of this invention over prior art are that it is able to indicate whether an image is altered or not, locate where the alteration was made, embed the data used for authen tication within the host image rather than as a separate file, insert the watermark with no visible distortion under normal viewing conditions, and store the watermarked image in lossy-compression format for efficient storage and transmission.