Image watermarking technology plays a key role in the protection of intellectual property rights. In addition to digital watermarking, optical watermarking has also been widely considered. A watermarking scheme based on Gerchberg–Saxton (GS) algorithm and integer wavelet transform (IWT) is proposed for image encryption. The scheme uses the unique phase reconstruction characteristics of GS algorithm, which makes it able to deal with a variety of complex local attacks in the process of protection and effectively restore the original image information. The obfuscation of position and numerical value information is realized by means of variable step Joseph space scrambling and pixel value bit processing. The carrier image is decomposed into subbands with different frequencies using IWT, all the information of the secret image is embedded bit by bit, which realizes the hiding of the image information. In addition, the SHA-256 function, the RSA algorithm, and the hyperchaotic system are combined to generate the cipher stream. The experimental results show that the algorithm has good imperceptibility and security, as well as strong robustness to cutting and salt and pepper noise attacks, and can restore the image quality well.