Image scrambling is an approach to secure the image data by scrambling the image into an unintelligible format. Based on M sequence which can be produced by a series shift registers, this paper proposes a method of scrambling 2-bit watermark image, in which the effectiveness is controlled by given private keys. The user can change the security keys to generate many different M sequences. In watermark embedding algorithm, block DCT with size of 8×8 is performed on the given image, the relationship between the selected DCT middle frequency coefficients is used to embed scrambled watermark. When extracting watermark from the watermarked image no original image is needed. The simulation results show the proposed scheme can guarantee high visual quality of watermarked image, and the same time attain a good robustness to common image processing and attacks.