A robust data hiding scheme for digital images based on watermarking is proposed. Non-overlapping coefficient blocks from the lowpas ssubband are selected after applying three levels of digital wavelet transform (DWT). Using minimum coefficient difference of blocks and a threshold value, the secret key is generated. The extraction process can be done without the host image using the secret key. The experimental results and performance analysis shows good imperceptibility and robustness under JPEG image compression and other common image processing operations like cropping, rotation, noise addition and filtering.