-Steganography involves hiding information in another media. PVD based steganography techniques uses the difference between the pixel values of a pair directly to hide the information. The proposed steganography system modifies the difference value before being used for hiding the information. This makes extraction of hidden data harder in case the steganography system fails. The algorithm divides the cover image in the block of 2 x 3 pixels and calculates average (N) of the bits that can be hidden in five pairs of that block. Thus if the difference value allows M-bits to be hidden in the pair, then only N-bits are hidden in that pair when M >N otherwise M (if M≤N) bits are hidden in that pair. Second level of security is added by converting the secret information into gray code before embedding it in the cover image. The algorithm provides good hiding capacity and improved quality of stego image with two levels of security for the secret information.