A robust, invisible watermarking scheme is proposed for digital images, where the watermark is embedded using the block-based lapped orthogonal transform (LOT). The embedding process follows a spread spectrum watermarking approach. In contrast to the use of transforms such as discrete cosine transform, our LOT watermarking scheme allows larger watermark embedding energy while maintaining the same level of subjective invisibility. In particular, the use of LOT reduces block artifacts caused by the insertion of the watermark in a block-by-block manner, hence obtaining a better balance between invisibility and robustness. Moreover, we use a human visual system (HVS) model to adaptively adjust the energy of the watermark during embedding. In our HVS model, each block is categorized into one of four classes (texture, fine-texture, edge, and plain-area) by using a feature known as the texture masking energy. Blocks with edges are also classified according to the edge direction. The block classification is used to adjust the watermark embedding parameters for each block.