Dyadic displacements of an image can be regarded as a special fype ofpermutations of its pirel address. This property can be used to encrypt an image without information loss, damage or addition. In this paper, we propose a new optical image encryption technique based on dyadic permutations and hologram interference. First, we adopt hologram interference to extract the phase of Fourier transform of an input image, and then the phase is processed through dyadic permutations of exclusive-OR FOR) operations. The originalimage can be successjdly recovered by using the inverse procedure.