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This paper proposes an encryption-based image watermarking scheme using a combination of second-level discrete wavelet transform (2DWT) and discrete cosine transform (DCT) with an auto extraction feature. The 2DWT has been selected based on the analysis of the trade-off between imperceptibility of the watermark and embedding capacity at various levels of decomposition. DCT operation is applied to the selected area to gather the image coefficients into a single vector using a zig-zig operation. We have utilized the same random bit sequence as the watermark and seed for the embedding zone coefficient. The quality of the reconstructed image was measured according to bit correction rate, peak signal-to-noise ratio (PSNR), and similarity index. Experimental results demonstrated that the proposed scheme is highly robust under different types of image-processing attacks. Several image attacks, e.g., JPEG compression, filtering, noise addition, cropping, sharpening, and bit-plane removal, were examined on watermarked images, and the results of our proposed method outstripped existing methods, especially in terms of the bit correction ratio (100%), which is a measure of bit restoration. The results were also highly satisfactory in terms of the quality of the reconstructed image, which demonstrated high imperceptibility in terms of peak signal-to-noise ratio (PSNR ≥ 40 dB) and structural similarity (SSIM ≥ 0.9) under different image attacks.