Image Encryption has a significant role in the field of cryptography. A new encryption scheme is introduced to protect an image from unauthorized access, in this scheme two separate keys are used for image encryption and data hiding with high degree of security. The content owner encrypts the original uncompressed image using an encryption key. The least significant bits (LSBs) of the encrypted image are compressed using a data hiding key to create space to embed an additional data. Run -Length Coding (RLC) and Haar Wavelet compression technique is employed to reduce the image size and facilitate faster transmission. Encrypted and decrypted sections, the quality of image retrieval and data extraction are achieved from RLC with their respective keys. In this scheme user can extract an image, data and both image and data based on the keys used.