A novel composition for a low-toxicity, water-soluble, holographic photopolymer capable of recording bright reflection gratings with diffraction efficiency of up to 50% is reported. The unique combination of two chemical components, namely, a chain transfer agent and a free radical scavenger, is reported to enhance the holographic recording ability of a diacetone acrylamide (DA)-based photopolymer in reflection mode by 3-fold. Characterization of the dependence of diffraction efficiency of the reflection gratings on spatial frequency, recording intensity, exposure energy, and recording wavelength has been carried out for the new low-toxicity material. The use of UV postexposure as a method of improving the stability of the photopolymer-based reflection holograms is reported. The ability of the modified DA photopolymer to record bright Denisyuk holograms which are viewable in different lighting conditions is demonstrated.