We propose an optical encryption/decryption technique based on 2-step phase-shifting digital holography for a cipher system. The technique using 2-step phase-shifting digital holography is more efficient than 4-step phase-shifting digital holography because the 2-step method has less data than 4-step method to restore or transmit the encrypted data. In our system, 2-step phase-shifting digital holograms are acquired by moving the PZT mirror with phase step of 0 or π/2 in the reference beam path and are recorded on CCD camera. The information data and the key are expressed with random binary amplitude and random phase. Digital hologram in this method is Fourier transform hologram and digitized with 256 gray-level. DC-term removal is essential to reconstruct and decrypt the original binary data information. The simulation shows that the proposed method gives good results for cipher system. The quantization error is also analyzed.© (2007) COPYRIGHT SPIE--The International Society for Optical Engineering. Downloading of the abstract is permitted for personal use only.