A secure watermarking algorithm for hologram authentication is presented in this paper. The algorithm exploits the noise-like feature of holograms to randomly embed a watermark in the domain of the discrete cosine transform with marginal degradation in transparency. The pseudo random number (PRN) generators based on a cellular automata algorithm with asymmetrical and nonlocal connections are used for the random hiding. Each client has its own unique PRN generators for enhancing the watermark security. In the proposed algorithm, watermarks are also randomly generated to eliminate the requirements of prestoring watermarks in the clients and servers. An authentication scheme is then proposed for the algorithm with random watermark generation and hiding.