This work combines Arnold transform method with the spatial domain to encrypt a covered image and also recovers the covered image by the application of inverse Arnold transform. First, transform a cover image into subparts which consists of eight binary images by decimal value to eight-digit binary operation. Then, transform eight binary images into sub-blocks of eight binary scrambled images by the Arnold transform, respectively. Further, recombine the sequence of the eight binary scrambled matrices into a scrambled matrix with 256 Gy levels according to the specific club. Discrete wavelet transform (DWT) is used to perform image compression on the input image and secretly hidden image which is done using alpha blending. Finally, derive an encrypted image from the scrambled image by the Hartley transform. Second, decode the encrypted image using inverse Arnold Transform. Inverse DWT is performed to regain the compressed images. Simulations indicate that the hybrid new technique has more security, more robustness counter to occlusion and attacks about with high degree of image scrambling.