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A novel approach to encrypting and hiding gray scale images with wavelet packet transform and bit planes decomposition is proposed. The proposed strategy can be applied not only to encryption and hiding of a single image, but also to multi-frame images. In the strategy, wavelet packet transform is used to decompose a carrier image into sixteen sub-band images, and eight high frequency and high entropy value of sub-images would be selected as carrier of a secret image from them. A chaotic sequence is employed to encrypt a secret image. And then the encrypted image is decomposed into eight bit planes. After impact factors of the bit planes are selected, the bit planes would separately be superimposed on the eight sub-band images in accordance with entropy values of the sub-images and information amount of the bit planes. Finally, the carrier image embedded the secret image is reconstructed using wavelet packet inverse transform. Experimental results show the approach is able to not only maintain fidelity of the carrier image, but also ensure security and safety of the secret image. Therefore, the approach can be applied to information security and crypto- communication of images in many fields, such as medical, commercial and military and so on.