Reversible data hiding means embedding a secret message in a cover image in such a manner, to the point that in the midst of extraction of the secret message, the cover image and, furthermore, the secret message are recovered with no error. The goal of by far most of the reversible data hiding algorithms is to have improved the embedding rate and enhanced visual quality of stego image. An improved encrypted-domain-based reversible data hiding algorithm to embed two binary bits in each gray pixel of original cover image with minimum distortion of stego-pixels is employed in this paper. Highlights of the proposed algorithm are minimum distortion of pixel’s value, elimination of underflow and overflow problem, and equivalence of stego image and cover image with a PSNR of ∞ (for Lena, Goldhill, and Barbara image). The experimental outcomes reveal that in terms of average PSNR and embedding rate, for natural images, the proposed algorithm performed better than other conventional ones.